Firm A prefersto borrowfloat-rate whilefirm Bprefers to borrow fixed-rate.Ais offered 4.5% fixedrateand LIBORfloatrate, whileBis offered6% fixedrateand LIBOR+0.5% floatrate. If both firms approach you as an MSF elite graduate for a consultation to reduce their borrowing costs, suggestan interest rate swap structure where A benefits 75% of the cost reduction and B benefits 25% of the cost reduction.

Firm A prefers to borrow float-rate while firm B prefers to borrow fixed-rate. A is offered 4.5% fixed rate and LIBOR float rate, while B is offered 6% fixed rate and LIBOR+0.5% float rate. If both firms approach you as an MSF elite graduate for a consultation to reduce their borrowing costs, suggest an interest rate swap structure where A benefits 75% of the cost reduction and B benefits 25% of the cost reduction. A B Issue Pay to the other Receive Net