What rate will company b pay to the bank

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Companies A and B have been offered the following rates per annum on a $20 million 5-year loan, and a bank, acting as intermediary, will charge 0.20% per annum (20 basis points) to arrange and manage the swap, which appears equally attractive to A and B.

                        Fixed Rate          Floating Rate
Company A              5.5%            LIBOR + 0.20%
Company B                6.5%            LIBOR + 0.40%

Problem 1: Company A requires a floating-rate loan, and company B requires a fixed-rate loan. If Company A pays LIBOR to the bank, and the bank pays LIBOR to Company Y, what rate will Company B pay to the bank?

Reference no: EM132856656

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