An insurance company owns $50 million of floating-rate bonds yielding LIBOR plus 1 percent. These loans are financed by $50 million of fixed-rate guaranteed
investment contracts (GICs) costing 10 percent. A finance company has $50 million of auto loans with a fixed rate of 14 percent. They are financed by $50
million of debt with a variable rate of LIBOR plus 4 percent. If the finance company is going to be the swap buyer and the insurance company the swap seller
what is an example of a feasible swap?
How did they come up the finance company (FC) paying Insurance company (IC) 12% and the IC paying the FC LIBOR + 2.5%?