The following statement is to be used in answering questions 3,4 and 5. Axil Corp. has not tapped the Deutsche mark public debt market because of concern about a likely appreciation of that currency and only wishes to be a floating-rate dollar borrower, which it can be at LIBOR + 1%. Bevel Corp. strongly prefers fixed-rate DM debt, but it must pay 1.5% more than the 6 1/4% coupon that Axil's DM notes would carry. Bevel, however, can obtain Eurodollars at LIBOR + 7%. 3. What is the maximum possible cost savings to Axil from engaging in a currency swap with Bevel if costs are not evenly split? a) 1% b) 75% c) 2% d) 1.25% 4. What is the maximum possible cost savings to Bevel from engaging in a currency swap with Axil if costs are not evenly split? a) 1% b) 75% c) 2% d) 1.25% 5. Suppose a bank charges .8% to arrange the swap and Axil and Bevel split the resulting cost savings. Then Axil will pay --- for its floating-rate money and Bevel will pay ---- for its fixed-rate money. a) LIBOR- .7%; 7.5% b) LIBOR + .4%; 7.15% c) LIBOR; 7.45% d) LIBOR + .5%; 6.75% The following statement is to be used in answering questions 3,4 and 5. Axil Corp. has not tapped the Deutsche mark public debt market because of concern about a likely appreciation of that currency and only wishes to be a floating-rate dollar borrower, which it can be at LIBOR + 1%. Bevel Corp. strongly prefers fixed-rate DM debt, but it must pay 1.5% more than the 6 1/4% coupon that Axil's DM notes would carry. Bevel, however, can obtain Eurodollars at LIBOR + 7%. 3. What is the maximum possible cost savings to Axil from engaging in a currency swap with Bevel if costs are not evenly split? a) 1% b) 75% c) 2% d) 1.25% 4. What is the maximum possible cost savings to Bevel from engaging in a currency swap with Axil if costs are not evenly split? a) 1% b) 75% c) 2% d) 1.25% 5. Suppose a bank charges .8% to arrange the swap and Axil and Bevel split the resulting cost savings. Then Axil will pay --- for its floating-rate money and Bevel will pay ---- for its fixed-rate money. a) LIBOR- .7%; 7.5% b) LIBOR + .4%; 7.15% c) LIBOR; 7.45% d) LIBOR + .5%; 6.75%