What is company net annual cash flow due to this loan

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Company A can borrow at a fixed rate of 6.0% or a floating rate of LIBOR + 0.2%. Company B can borrow at a fixed rate of 6.8% or a floating rate of LIBOR + 0.6%.

(a) If Company A desires a floating rate and Company B desires a fixed rate, design a swap that will net a bank 0.2% and appear equally attractive to both companies.

(b) If the nominal amount of the loan is $10 million, what is the annual cash flow from Company B to the bank? What is Company B’s net annual cash flow due to this loan?

Reference no: EM131540819

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