Problem $14\mathrm{.}1$

$12\mathrm{.}5$ Alpha and Beta Companies can borrow for a five$-$year term at the following rates:

points

Required:

a$.$ Calculate the quality spread differential $($QSD$).$

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.

Answer is not complete.

Complete this question by entering your answers in the tabs below.

Required $A$

Required B$1$

Required B$2$

Required B$3$

Calculate the quality spread differential $($QSD$).$

Note: Enter your answers as a percent rounded to $1$ decimal place.

Quality spread differential

$\%$