Problem
Company "A" and company "B" can request a 4-year loan with the following interest rates:
|
|
Empresa "A"
|
Empresa "B"
|
|
fixed interest rate
|
10%
|
11.5%
|
|
variable interest rate
|
LIBOR
|
LIBOR + 0.5%
|
The following is requested:
a) Calculate the differential between the interest rates.
b) Create a swap in which company "A" wants a variable interest rate and company "B" wants a fixed interest rate.