(Answered) Two firms x and y are able to borrow funds as followsx

Economics

Two firms X and Y are able to borrow funds as follows:

X: Fixed-rate funding at 4% and floating rate at Libor-1%

Y: Fixed-rate funding at 6% and floating rate at Libor+1%

Show how these two firms can both obtain cheaper financing using a swap.

What swap would you suggest to the two firms if you were an unbiased advisor?

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Business Economics, Economics

Category:- Business Economics
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