Question: AAA can borrow $100M either at 5% or at LIBOR+0.5% and wants to borrow at fixed rate. BBB can borrow $100M either at 6% or

AAA can borrow $100M either at 5% or at LIBOR+0.5% and wants to borrow at fixed rate. BBB can borrow $100M either at 6% or at LIBOR+2% and wants to borrow at floating rate. They would like to involve in a mutually beneficial swap in which one firm pays the other LIBOR rate and receives x% fixed rate in return. If they want to split QSD equally, then in such a swap:

	AAA will pay BBB x=3.75%
	AAA will pay BBB x=4.25%
	BBB will pay AAA x=3.75%
	BBB will pay AAA x=4.25%
	None of the above

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