What are the net payments of carter and brence

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Carter Enterprises can issue floating-rate debt at LIBOR +2 percent or fixed-rate debt at 10.00 percent. Brence Manufacturing can issue floating-rate debt at LIBOR +3.1 percent or fixed-rate debt at 11 percent. Suppose Carter issues floating-rate debt and Brence issues fixed-rate debt. They are considering a swap in which Carter will make a fixed-rate payment of 7.95 percent to Brence, and Brence will make a payment of LIBOR to Carter. What are the net payments of Carter and Brence if they engage in the swap? Will Carter be better off to issue fixed-rate debt or to issue floating-rate debt and engage in the swap? Will Brence be better off to issue floating-rate debt or to issue fixed-rate debt and engage in the swap?

Reference no: EM131103542

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