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Bank A prefers borrowing at a floating rate while a non-financial firm prefers borrowing at a fixed rate. However, the fixed and floating rate facing the bank is 3% and 3-month LIBOR plus 8 basis points, respectively, while the fixed and the floating rate facing the non-financial firm is 5.5% and LIBOR plus 80 basis points. Do you see any possible comparative advantage in the interest rate for both entities? How would the interest rate swap benefit them?

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Financial Management, Finance

Category:- Financial Management
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