Structure a swap which allows the two companies share

Reference no: EM133290987

Company AAA and company BBB each need $1 million in funds and are quoted the following rates in the fixed and floating markets. AAA agrees to borrow at the fixed-rate and BBB agrees to borrow at the floating-rate. Show all calculations.

Debt market	AAA	BBB
Fixed rate funds	4.4%	5.4%
Variable rate funds	BBSW + 1.2%	BBSW + 1.4%

- Structure a swap which allows the two companies share the differential benefit equally.

- What fixed rate would AAA receive from BBB if they negotiated to receive 75% share of the differential?

- List and briefly explain the three basic types of swaps.

Reference no: EM133290987

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