Use the following data to answer this question:

	Fixed	Floating
Firm AAA	10%	LIBOR + 0.5%
Firm BBB	11%	LIBOR + 0.2%
Spread?	?	?

2. Firm AAA has a/an ______ advantage in ________ markets.

a. Comparative, both

b. Absolute, both

c. Comparative, fixed

d. Absolute, floating

3. Use the data in the previous question to answer this question.

If you design a swap that is equally attractive to both firms, what must Firm AAA pay Firm BBB?

a. 9.25%

b. 9.75%

c. LIBOR + 0.25

d. LIBOR + 1.75