What are the gains for the Swap Bank and Firm B respectively?

Fi Show more The following table shows the borrowing opportunities for two firms. Firm A Firm B Fixed rate 11.75 % 9.5% Floating rate LIBOR + 0.75% LIBOR Firm A can raise the money by issuing 5-year floating-rate notes at LIBOR + 0.75 %. However Firm A would prefer to borrow at a fixed rate. On the other hand Firm B is considering issuing 5-year fixed-rate Eurodollar bonds at 9.5 percent. It would make more sense for Firm B to issue floating-rate notes at LIBOR in order to finance floating-rate Eurodollar loans. Finally the swap bank makes the following offers to both firms. What is the gain for each party: the Swap Bank Firm A and Firm B based on the QSD? Show your work. (40points) Firm A and B face the same financing option as the above table. However the Swap Bank offers a new LIBOR financing as in the table below. That is the Swap bank provides two firms with LIBOR rate only. If Firm A gains 0.50% from this swap figure out the ask price for LIBOR. What are the gains for the Swap Bank and Firm B respectively? Show your work. U.S. $ Bid Ask 5 year 10.00 % ( )% Show less

Posted in Uncategorized