Damian and Glass are two companies that can borrow for a five year term at the following rates. Damian Glass International credit rating AAA A Fixed-rate borrowing cost 6% 10% Floating-rate borrowing cost LIBOR+ 1% LIBOR + 2% (i) Calculate the quality spread differential (QSD). Enter your answer as a percentage to 2 decimal places, e.g. 1.23 (1 Mark) Answer % (ii) Develop an interest-rate swap in which both Damian and Glass have an equal cost savings in their borrowing costs. Assume that Damian desires floating-rate debt and Glass desires fixed-rate debt. No swap bank is involved in the transaction. Assume that the payments are all made against flat Libor. Assume that Libor is currently 4%. (10 Marks) Fill in the blanks. Enter answers as one of the following formats. Numbers should be percentages to 2 decimal places, e.g. 1.23, LIBOR, LIBOR + 1.23 Damian would borrow at a rate of Answer % from their bank. Glass would borrow at a rate of Answer % from their bank. Damian will pay Answer % to Glass Glass will pay Answer % to Damian Damian's all in cost is Answer % Glass's all in cost is Answer % (iii) Based on the information above suppose a swap bank is offering the following quote on USD Libor 7.8 7.9 Under this scenario Damian will pay Answer to the swap bank and Glass will pay Answer. (2 marks) Based on this calculate the gain (in basis points) for: Swap Bank - Answer bps (1 mark) Damian - Answer bps (1 mark) Glass - Answer bps (1 mark)