Question: Alpha and Beta Companies can borrow for a five-year term at the following rates: Moody's credit rating Fixed-rate borrowing cost Floating-rate borrowing cost Required:

Alpha and Beta Companies can borrow for a five-year term at the

Alpha and Beta Companies can borrow for a five-year term at the following rates: Moody's credit rating Fixed-rate borrowing cost Floating-rate borrowing cost Required: a. Calculate the quality spread differential (QSD). Alpha Beta Aa Baa 12.0% SOFR+0.72% 15.0% SOFR+1.72% b-1. Develop an interest rate swap in which both Alpha and Beta have an equal cost savings in their borrowing costs. Assume Alpha desires floating-rate debt and Beta desires fixed-rate debt. No swap bank is involved in this transaction. What rate should Alpha pay to Beta? b-2. What rate will Beta pay to Alpha? b-3. Calculate the all-in-cost of borrowing for Alpha and Beta, respectively.

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