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 Alpha

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 Alpha Aa 11.6% LIBOR Beta Baa 14.2% LIBOR +1% Assuming more realistically that a swap bank is involved as an intermediary. Assume the swap bank is quoting five-year dollar interest rate swaps at 12.9-11.9 percent against LIBOR flat. Calculate the quality spread differential (QSD). (Enter your answers as a percent rounded to 1 decimal places.)

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