Q1. Companies A and B face the following interest rates: B A US Dollars (floating rate) LIBOR+0.5% LIBOR+1.0% Canadian dollars (fixed rate) 5.0% 6.5% Assume that A wants to borrow U.S. dollars at a floating rate of interest and B wants to borrow Canadian dollars at a fixed rate of interest. A financial institution is planning to arrange a swap and requires a 50-basis-point spread. If the swap is equally attractive to A and B, what rates of interest will A and B end up paying? Q2. Company A wishes to borrow U.S. dollars at a fixed rate of interest. Company B wishes to borrow sterling at a fixed rate of interest. They have been quoted the following rates per annum: Sterling US Dollars Company A 11.0% 7.0% Company B 10.6% 6.2% Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 15 basis points per annum for each of the two companies