Slammer plc has an excellent rating on the corporate bond market and can borrow at a fixed rate of 11.5 per cent, whereas Can plc, which is regarded as riskier, can borrow at a fixed rate of 12 per...

Slammer plc has an excellent rating on the corporate bond market and can borrow at a fixed rate of 11.5 per cent, whereas Can plc, which is regarded as riskier, can borrow at a fixed rate of 12 per cent. For floating rate debt, Slammer plc can borrow at LIBOR + 0.2 per cent and Can plc can borrow at LIBOR + 0.4 per cent. If Slammer plc wants a floating rate loan and Can plc wants to lock into current interest rate levels through a fixed rate loan, show how an interest rate swap can benefit both companies. If the benefits from the swap are divided equally between the two companies, calculate their post-swap borrowing rates.