IBM & GE both require $100 million for a 5- year period. 22. IRM would like to borrow at a fixed rate, whereas GE would prefer to borrow at a floating rate. The cost to each party of accessing either the fixed rate or the floating rate for a new 5 year debt issue is as follows: To reduce their financing Borrower Fixed rate available Floating Rate available IBM GE LIBOR + 1.0% 8.5% 7.0 LIBOR + 0.5% Set up an interest rate swap, so that both parties can take advantage of the spread differential. It is further agreed that both GE & IBM would share equally from the interest rate differential. The Bank earns 0.10%