For this and the next 2 questions. Interest rate swap: Design an interest rate swap for the two firms described below. Achimota Foods wishes to take out a floating interest loan while Tamale Systems would like to issue a fixed rate loan.

	Achimota Foods	Tamale Systems
Fixed	15%	19%
Floating	Libor + 3%	Libor + 5%

Suppose the gains are to be divided in the following manner: 80% for Achimota and 20% for Tamale. In order for the swap to be successful, which party should borrow fixed and pay floating?

		Achimota should borrow fixed at 15% and pay floating
		Tamale should borrow fixed at 15% and pay floating
		Achimota should borrow floating at Libor + 3% and pay fixed at 15%
		Tamale should borrow fixed at 19% and pay floating

1. Based on the ratios for splitting up the quality swap, how much is the net savings due to Achimota?

   		1.6%
   		0.4%
   		0.5%
   		1.0%
   		None of the above

2. Describe the swap payments made by each of the parties.

   		Tamale pays floating rate at Libor + 1.4%; Achimota pays fixed rate loan at 18.6%
   		Achimota pays floating rate at Libor + 2%; Tamale pays fixed rate loan at 18%
   		Achimota pays floating rate at Libor + 1.4%; Tamale pays fixed rate loan at 18.6%
   		None of the above