What rates of interest will a and b end up paying

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Reference no: EM131959641

Qusetion: Company A:

US Dollars (floating rate): LIBOR +0.5%

Canadian Dollars (fixed rate): 5.0%

Company B:

US Dollars (floating rate) LIBOR +1.0%

Canadian Dollars (fixed rate): 6.5%

Assume that A wants to borrow US dollars at a floating rate of interest and B wants to borrow Canadian dollars at a fixed rate if interest. A financial institution is planning to arrange a swap and requires a 50-basis-point spread. If the swap is equally attractive to A and B, what rates of interest will A and B end up paying?

Reference no: EM131959641

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