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Companies ABC & XYZ can borrow for a three-year term at the following rates: ABC XYZ Moody's credit rating Aa Baa Fixed-rate borrowing cost

Companies ABC & XYZ can borrow for a three-year term at the following rates: ABC XYZ Moody's credit rating Aa Baa Fixed-rate borrowing cost 9.75% 12.75% Floating-rate borrowing cost LIBOR+0.25% LIBOR + 1.25% Assume that a swap bank is involved as an intermediary. The swap bank is to give a quote on three-year dollar interest rate swaps against LIBOR flat. What is the lowest Bid the swap bank can quote?

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