Design a swap contract that benefits both companies include


Each of two companies needs to issue $10 million in 5-year debt on the same date. Company A is quoted a market rate of 13% for fixed rate debt and LIBOR + 200 basis points (b.p.) for floating debt. Company B can issue notes at either a fixed 11% or floating LIBOR + 100 b.p. Company A would prefer to issue fixed rate debt, while company B wants to issue floating rate debt. Design a swap contract that benefits both companies. Include the swap rate of your contract. (Show your work.)

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Finance Basics: Design a swap contract that benefits both companies include
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