3 a. Given the data provided below, state whether a profitable swap may be arranged...
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3 a. Given the data provided below, state whether a profitable swap may be arranged in both situation 1 and situation 2. In your answer calculate comparative advantages and show the net borrowing differential that may be gained. Borrower Fixed rate Variable rate Situation 1 A 7.20% BBSW +0.25% B I 9.70% BBSW + 1.75% Situation 2 R 9.00% LIBOR +0.50% S 11.00% LIBOR + 2.50% b. Within the context of an interest rate swap, explain why the existence of a comparative advantage net differential may be beneficial
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