What is the maximum savings available to both

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SWAPS): Koby & Maru Corporations both seek at the lowest possible cost. They face the following rate structure:

                                                                              Koby                      Maru               

Credit Rating                                                        AA                          BB

Cost of fixed funds                                              10.0%                      13.0%

Cost of floating funds                                      Libor + 0.5%             Libor+1.0%

In what type of funding Koby (Maru) have a comparative advantage?

If a swap is arranged, what is the maximum savings available to both?

Outline a swap such that savings are divided equally between the two.

Reference no: EM131554718

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