1. What is the dealer's bid and ask quotes on a five-year swap with a quoted 60770 swap spread over a T-note with a yield of 6.5% ? 2. The Star Chemical Company wants to finance one of its production plants by borrowing $150 million for five years. Based on its moderate credit ratings, Star can borrow five-year funds at a 10.5% fixed rate or at a floating rate equal to LIBOR +75 bp. Given the choice of financing, Star prefen the fixed-rate loan. The Moon Development Company is also looking for five-year funding to finance its proposed SISO million office park development. Given its high credit rating, Moon can borrow the funds for 5 years at a fixed rate of 9.5% or at a floating rate equal to the LIBOR +25 bp. Given the choice, Moon prefers a variable-nte loan. In summary, Star and Moon have the following fixed and floating rate loan altematives: (1) Describe Moon's absolute advantuge and each company's comparative advantage? (2) What is the total possible interest nate reduction gain for the parties if both were to create synthetic positions with a swap? 1. What is the dealer's bid and ask quotes on a five-year swap with a quoted 60770 swap spread over a T-note with a yield of 6.5% ? 2. The Star Chemical Company wants to finance one of its production plants by borrowing $150 million for five years. Based on its moderate credit ratings, Star can borrow five-year funds at a 10.5% fixed rate or at a floating rate equal to LIBOR +75 bp. Given the choice of financing, Star prefen the fixed-rate loan. The Moon Development Company is also looking for five-year funding to finance its proposed SISO million office park development. Given its high credit rating, Moon can borrow the funds for 5 years at a fixed rate of 9.5% or at a floating rate equal to the LIBOR +25 bp. Given the choice, Moon prefers a variable-nte loan. In summary, Star and Moon have the following fixed and floating rate loan altematives: (1) Describe Moon's absolute advantuge and each company's comparative advantage? (2) What is the total possible interest nate reduction gain for the parties if both were to create synthetic positions with a swap