3. The following table shows the borrowing opportunities for two firms. Fixed rate Floating rate Firm A 11.75 % LIBOR + 1.00% Firm B 9.75% LIBOR Firm A can borrow at a floating rate at LIBOR+1.00%. However, Firm A would prefer to raise the money by issuing 5-year fixed-rate notes at 11.75%. On the other hand, Firm B considers issuing 5-year fixed rate Eurodollar bonds at 9.75% while it would make more sense for Firm B to borrow at a floating rate at LIBOR. Finally, the swap bank makes the following offers to both firms. Interest Rate Swap Swap Bank 93/4% 11 1/2% LIBOR - 1/4% LIBOR + 1% Firm Firm B 1 a) What is the total gain for this swap? In other words, figure out QSD (quality spread differential). (25points) b) Figure out the gain for Firm A (25points) c) Figure out the gain for Firm B. (25points) d) Figure out the gain for Swap bank. (25points)