An Investment Bank Is to Advise Two Client Companies on the Establishment

Multiple Choice

An investment bank is to advise two client companies on the establishment of a mutually beneficial swap facility.Both companies are able to access funding within the fixed interest rate debt markets and the floating interest rate debt markets.However,company X has a comparative advantage over company Y within one of the debt markets.Based on the following data,what is the comparative advantage of company X?
Company X:
Fixed rate 10.8% per annum; floating rate BBSW+ .3% per annum
Company Y:
Fixed rate 11.5% per annum; floating rate BBSW+1.7% per annum

A) Fixed interest rate debt market, 0.7% per annum
B) Floating interest rate debt market, 1.4% per annum
C) Fixed interest rate debt market, 10.8% per annum
D) Floating interest rate debt market, BBSW + 0.3% per annum