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Q. Company A can issue floating rate debt at LIBOR + 1 percent also can issue fixed rate debt at 9 percent. Company B can issue floating rate debt at LIBOR + 1.4 percent also can issue fixed rate debt at 9.4 percent. Suppose A issues floating rate debt also B issues fixed rate debt. y engage in subsequent swap: A will make a fixed 7.95 percent payment to B, also B will make a floating rate payment equal to LIBOR to A. Illustrate what are resulting net payments of A also B?

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Operation Management, Management Studies

Category:- Operation Management
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