Solution-What is firm yyy net borrowing cost after savings

What is firm yyy net borrowing cost after savings

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Reference no: EM132911196

Assume Firm XXX can borrow USD for 10 years at 5% and can borrow at a variable rate of Libor + 2%.

Firm YYY can borrow USD for 10 years at 5.5 % and can borrow at a variable rate of Libor.
Firm XXX wants to borrow at a variable rate and Firm YYY wants to borrow at a fixed rate.

Assume that a swap dealer puts a swap together and profits by 0.3%. The rest of the savings is shared equally by Firm XXX and Firm YYY.

Problem 1: What is Firm YYY's net borrowing cost after savings.

Reference no: EM132911196

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