AAA Corp
Subject:FinancePrice: Bought3
AAA Corp. can borrow at a fixed rate of 5.0% and at a floating rate
of LIBOR plus 40 basis points. BBB Cop. can borrow at a fixed rate of 5.8% and at a floating rate of LIBOR plus 90 basis points. AAA Corp. wants a floating rate loan and BBB Corp. wants a fixed rate loan. The two companies agree to enter into a swap whereby AAA pays LIBOR and BBB pays fixed. The swap rates should lie in which of the following intervals so that both companies benefit from the swap?
A)Between 4.6% and 4.9%
B)Between 5.5% and 5.7%
C)Between 4.4% and 4.7%
D)Between 5.5% and 5.9%
E)None of the above
