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Two companies have investments which pay the following rates of interest:

Fixed : Firm A 6% , Firm B 8%

Float: Firm A Libor , Firm B Libor + 0.5%

Assume A prefers a fixed rate and B prefers a floating rate. If an intermediary charges both parties equally a 0.1% fee and any benefits are spread equally between Firm A and Firm B. If an intermediary charges both parties equally a 0.1% fee and any benefits are spread equally between Firm A and Firm B, what rates could A and B receive on their preferred interest rate?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92688090

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