question archive Company A has excellent financials and prefers variable to fixed rate debt
Company A has excellent financials and prefers variable to fixed rate debt
Subject:FinancePrice: Bought3
Company A has excellent financials and prefers variable to fixed rate debt. Company B has poor financials and prefers fixed to variable rate debt. Assume that Companies A and B could issue bonds as follows:?
Company A: Fixed bond rate 10%, variable rate bond LIBOR +1%
Company B: Fixed bond rate 12%, variable rate bond LIBOR +1.5%
a. none of the options listed
b.an interest rate swap will probably not be advantageous to Company A because it can issue both fixed and variable debt at more attractive rates than Company B.
c.need additional information
d.?an interest rate swap attractive to both parties could result if Company A agreed to provide Company B with variable rate payments at LIBOR + 1 percent in exchange for fixed rate payments of 10.5 percent.
e. an interest rate swap attractive to both parties could result if B Company B agreed to provide Company A with variable rate payments at LIBOR + 1 percent in exchange for fixed rate payments of 10.5 percent.
