XYZ company has is top investment grade rating desires to issue 2-year FRNs. It can issue 3 and 6-month FRNs at L + .75 %. ABC company has a speculative rating. Also desires to issue 2-year FRNs. It finds it can an issue FRNs at (6-month L + 1.05% or at 3-month L + 1.00 %. Now, let us assume that the principal is $30 Million. Determine the QSD and set up a floating-for-floating rate swap where the swap bank receives .135 percent and the two counter parties share the remaining savings equally.

Answer rating: 100% (QA)

For XYZ Company 3month FRN rate L 075 6month FRN rate L 075 For ABC Company 3month FRN rate L 100 6m... View the full answer