A swap bank quotes the following pricing schedule for a Polish zloty coupon (interest rate) swap. 

This schedule assumes nonamortizing debt and semiannual rates (sa). Quotes are against 6-month LIBOR Polish zloty flat. TN = Polish Treasury Note rate.

a. Ford Motor Company has 4-year floating rate zloty debt at 6-month LIBOR plus 45 bps. Ford wants to swap into fixed rate zloty debt. Describe Ford’s floating-for-fixed zloty coupon swap.

b. Polish Motors (PM) has 4-year fixed rate zloty debt at 9.83 percent (BEY). PM wants to swap into floating rate zlotys. Describe PM’s fixed-for-floating zloty coupon swap.

c. What does the swap bank gain from these transactions?

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Coupon Swap Pricing Schedule (Polish zloty) Maturity Bank Pays Fixed Rate Bank Receives Fixed Rate Current TN Rate 4 years 4 yr TN sa +24bps 4 yr TN sa + 78bps 7.98%