Question: A and B can borrow for a 5 - yrear term at the following rates: A B Rating Baa Fixed rate borrowing cost 1 0

A and B can borrow for a 5-yrear term at the following rates: A B Rating Baa Fixed rate borrowing cost 10.5%13.0% Floating rate SOFR+0.5% SOFR+1.5% a. Calculate QSD (5%) b. If A agrees to pay SOFR+1% to B in return for a fixed rate of 12%, what is the all-in cost for A and B, respectively? (12%) c. Continued from b, how do A and B share the QSD from the swap? (5%)

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