Question: Alpha and Beta Companies can borrow for a five-year term at the following rates: Alpha Beta Moodys credit rating Aa Baa Fixed-rate borrowing cost 11.5

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

Alpha Beta
Moodys credit rating Aa Baa
Fixed-rate borrowing cost 11.5 % 14.0 %
Floating-rate borrowing cost LIBOR LIBOR + 1 %

Calculate the quality spread differential (QSD).

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