Alpha and BetaCompanies can borrow for a ten-year term at the following rates:

	Alpha	Beta
Fixed-rate borrowing cost	5.0%	7%
Floating-rate borrowing cost	LIBOR+1%	LIBOR

a. Calculate the quality spread differential (QSD).How do Alpha and Beta swap their borrowings?

b. Calculate all in-cost in which both Alpha enjoys 60% of total cost savings while Beta enjoys 40% total cost savings in their borrowing costs.

c. Suppose a bank charges 1% to arrange the swap and Alpha and Beta split the resulting cost savings.Calculate all incost in this case.