Suppose that IBM would like to borrow floating-rate yen, whereas Korea Development Bank (KDB) would like to borrow fixed-rate dollars. IBM can borrow fixed-rate yen at 3.4 percent or floating rate dollars at LIBOR + 0.3 percent. KDB can borrow fixed-rate yen at 4.9 percent or floating-rate dollars at LIBOR + 0.8 percent as shown below: Borrower Fixed-Rate Yen Available Floating-Rate Dollars Available Korea Development Bank 4.9% LIBOR + 0.80% IBM 3.4% LIBOR + 0.3% Difference

a. What is the difference range of possible cost savings that IBM can realize through an interest rate swap with KDB?

b. What is the total gain in the market in basis points.

c. Bank of America, will arrange the swap in the following rates:

IBM agrees to pay Bank of America LIBOR in exchange of 3.5% Fixed rate.

At the same time, KDB agrees to pay Bank of America 3.7% in exchange of LIBOR.

Calculate the gain from this Swap for each party to the contract - Bank of America, IBM and KDB.