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SBC Inc. needs floating rate dollars, which it can borrow at LIBOR + 1%. Fixed rate...

SBC Inc. needs floating rate dollars, which it can borrow at LIBOR + 1%. Fixed rate dollars are available to the firm at 8.0% per year. CCS Steel Corp. can borrow fixed-rate dollars at annual rate of 11% or floating rate dollars at LIBOR + 2% per year. CCS would prefer to borrow fixed rate dollars. Is it possible to arrange a swap agreement so that both firms benefit equally from the swap? If yes, explain how much SBC would pay for floating rate funds and how much CCS would pay for fixed rate funds. If not, explain why not. (Note: a bank intermediation is not necessary because the two firms are business partners) (Show Work)

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
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