The following information relates to Questions 31 to 33) NST Trust is in the market to borrow $2 million for five years. Because of its small size uediversification in its loan portfolio, NST prefers fixed-tate debt to minimizs fluctuations in its interest payments PBC Bank is a large bank with $150 billion in assets. It is in the market to borrow $2 million to finance a loan to a customer customer's preferences. . The rate on the loan is floating because of the Therefore, PBC prefers to borrow on a floating-rate basis. It happens that NST and PBC have talked to the same money market dealer about their needs. The dealer's observations after checking the market are summarized as below Fixed-rate Market Floating-rate Market PBC Bank 6.50% T-bill rate plus 1% NST Trust 8.50% T-bill rate plus 2.25% 31. What is the net quality differential? _ ) 2.00% B) 0.75% C) 3.25% D) 1.25% Hint: NOD- ARP-AR 32. Which of the following is true? A) PBC Bank has the absolute advantages in both the fixed-rate and floating-rate markets B) NST has comparative advantages in the floating-rate market C) $15,000/year in interest costs can be saved by allowing PBC and NST to borrow at their preferred terms through a swap arrangement D) All of the above In order to share equally the savings in interest costs, what rate will NST pay in the swap contract as a fixed-payment party to PBC in the fixed-rate market? 33. A) 8.125% B) 7.500% C) 7.750% D) 7.250%