Fixed
Float
Amount
Company A
(Wants Fixed)
Company B
(Wants Float)
Company C
(Wants Float)
8%
8%
11%
7%
8%
10%
$1,000,000
$600,000
$400,000
What is the effective rate for each company if they try to engage in swap transactions?
Assume the following scenario
Company A
Company B
Company C
(Wants Fixed)
(Wants Float)
(Wants Float)
Fixed
Float
Amount
10%
9%
10%
7%
8%
10%
$1,000,000
$600,000
$600,000
Assume that A&B would share the benefits of a swap evenly with each other. Assumer A&C
would split the swap 60-40 in favor of A. What is the effective rate of borrowing for each of the
companies after the swaps?