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Suppose that a floating rate is preferable for Company A and a fixed rate is...

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Finance

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Suppose that a floating rate is preferable for Company A and a fixed rate is preferable for Company B. There is a swap bank standing ready to facilitate the swap deal. Three parties agree to equally share the gains (savings) from the swap deal. If Company A pays LIBOR to swap bank under the swap deal, and the swap bank pays LIBOR - 0.1% to Company B: A) What interest rate should Company B pays to swap bank in return? (7 points) LIBOR B) What interest rate should swap bank pays to Company A in return? (7 points) Company A can borrow at the fixed interest rate of 9.5% or at the floating rate of LIBOR+0.3%. Company B, on the other hand, can borrow at the fixed interest rate of 11.0% or at the floating rate of LIBOR + 0.9%

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