The following table shows the borrowing opportunities for two firms.

Firm A can borrow at a floating rate at LIBOR $+0\mathrm{.}50\%.$ However, Firm A would

prefer to raise the money by issuing $5-$year fixed$-$rate notes at $11\mathrm{.}25\%.$ On the other

hand, Firm B considers issuing $5-$year fixed rate Eurodollar bonds at $9\mathrm{.}75\%,$ while

it would make more sense for Firm B to borrow at a floating rate at LIBOR. Finally,

the swap bank makes the following offers to both firms.

a$)$ What is the total gain for this swap? In other words, figure out QSD $($quality

spread differential$).(25$points$)$

b$)$ Figure out the gain for Swap bank. $(25$points$)$

c$)$ Figure out the gains for Firm A and Firm B$,$ respectively. $(40$points$)$