Fm problem

hello laxmi varri, 

company        fixed rate           floating rate

 xyz ltd               7%                  LIBOR +2%

 abc ltd              6.5%                LIBOR +2%

1) DIFFERENCE IN FLOATING RATE IS ZER0

2) DIFFERENCE IN FIXED RATE IS = 0.5% (7%-6.5%)

 DIFFERENCE IN FIXED & FLOATING RATE = 0.5% (1-2)

NOTE; ASSUMPTION THAT NET GAIN 0.5% SHARED EQUALLY BETWEEN XYZ LTD,ABC LTD,DEALER.

SHARE OF XYZ LTD = 0.16%, SHARE OF ABC LTD = 0.16%, SHARE OF DEALER LTD = 0.18%(.02% GIVEN EXCESS BECAUSE OF ROUND FIGURES)

CONCLUSION:

1) ABC LTD BORROW 6.5% FIXED INTEREST RATE & LEND IT TO XYZ LTD & RECIEVE COMMISSION = 0.16. i.ee EFFECTIVE INTEREST RATE LIBOR + 1.84% ( LIBOR RATE +2% - 0.16%)

2) XYZ LTD EFFECTIVE INTEREST RATE = 6.5%+0.16+0.18 = 6.84%

3) GAIN TO DEALER EXCHANGE COMMISSION = 0.18%.

THANK U SO MUCH