Show the rates of interest will end up paying

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You are the corporate treasurer of Martial International Inc. Your firm rated as AAA, is able to raise capital in US dollars at floating rate of LIBOR+0.5% or Canadian dollars at 5.5% flat. However, Mo International ltd, with a rating of A, is only able to raise the capital in US dollar at floating rate of LIBOR +0.75% or in Canadian Dollars at a fixed rate of 6.75%.

Question 1: Assume that Martial International Inc wants to borrow US dollars at a floating rate of interest and Mo International ltd wants to borrow Canadian dollars at a fixed rate of interest. A financial institution is planning to arrange a swap and requires a 30-basis-point spread. Construct a swap that is equally attractive to Martial International Inc and Mo International Inc. and show the rates of interest they will end up paying.

Reference no: EM132573162

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