Information for 32

Assume that A is a credit-worthy firm that can borrow at 8.1% fixed rate or at LIBOR + 0%. A is currently borrowing at a fixed rate but would like to borrow at a floating rate.

B is a less-credit-worthy firm and can borrow at 9.4% fixed rate or at LIBOR + 1%. B is currently borrowing at a floating rate but would like to borrow at a fixed rate.

Assuming that both firms want a 10-year maturity and the Swap Bank quotes are currently 8.2% - 8.3%, how much how much would each party pay after the swap contract where both A and B will save 10bp respectively?

Question 32 Same facts as above: what will be the percentage of the net payments to the Swap Bank? 0.0% 0.1% 0.2% 0.3% 2.86 pts Question 32 Same facts as above: what will be the percentage of the net payments to the Swap Bank? 0.0% 0.1% 0.2% 0.3% 2.86 pts