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Company A can issue floating-rate debt at LIBOR + 1%,and it can issue fixed rate debt at 9%.Company B can issue floating-rate debt at LIBOR + 1.5%,and it can issue fixed-rate debt at 9.4%.Suppose A issues floating-rate debt and B issues fixed-rate debt,after which they engage in the following swap: A will make a fixed 7.95% payment to B,and B will make a floating-rate payment equal to LIBOR to A.What are the resulting net payments of A and B?
Hedge Fund
A Hedge Fund is a private investment fund that uses complex strategies in both domestic and international markets with the goal of generating high returns.
Nondepository Financial Institution
Financial entities that do not accept traditional deposits like a bank, but may offer other financial services such as investment, insurance, and retirement plans.
Market Order
Order that instructs the investor’s broker to obtain the best possible price.
Best Possible Price
Achieving the most favorable cost condition under given circumstances, often in purchasing or selling scenarios.
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