3. Use the following information to set up an interest rate swap between Company A and Company B. Assume a notional prin

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3 Use The Following Information To Set Up An Interest Rate Swap Between Company A And Company B Assume A Notional Prin 1 (26.8 KiB) Viewed 44 times

3. Use the following information to set up an interest rate swap between Company A and Company B. Assume a notional principal of $10,000,000. (Total 4 Marks) Company A AAA 6-month LIBOR +0.225% 3-month LIBOR +0.125% Company B A 6-month LIBOR + 1% 3-month LIBOR +0.625% a. What is the quality spread differential? (1 Mark) b. Set up a floating-for-floeting rate swap where the swap bank receives 0.1% and the two counterparties share the remaining savings equally. Assume Company A prefers 3-month LIBOR and Company B prefers 6-month LIBOR. (3 Marks)