Compnay B requires floating and Company A requires fixed rate.
Company A and B can swap Rate with each other.
Interest Rate if they dont swap = interest for Co A + Interest for Co B
= 6% + Libor + 3.7%
= 9.7% + Libor
Interest Rate if they swap = interest for Co A + Interest for Co B
= 7.8% + Libor + 1.1%
= 8.9% + Libor
Saving in Interest = (9.7% + Libor) - (8.9% + Libor)
= 0.8%
Saving in interest after intermediary inerest = 0.8% - 0.3% = 0.5%
Savings to Co A & Co B each per year = (40 MN * 0.5%) /2 = 0.1 Mn per year
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