Consider the borrowing rates for Parties A and B.A wants to finance a $100,000,000 project at a fixed rate.B wants to finance a $100,000,000 project at a floating rate.Both firms want the same maturity,5 years.
$$\begin{array} { c c c l }
\text { FinI } & \text { Fixed Rate } & { \text { Floating } } \
\text { A } & \$ 10.3 \% & \text { Prime } + 1\%\
\text { B } & \$ 8.9 \% & \text { Prime } + 1 / 2\%
\end{array}$$ For your swap (the one you have shown above)how would the swap bank quote the swap against prime? (Hint: they are quoting a bid-ask spread against "flat" prime.)

Question

Consider the borrowing rates for Parties A and B.A wants to finance a $100,000,000 project at a fixed rate.B wants to finance a $100,000,000 project at a floating rate.Both firms want the same maturity,5 years.
 $$\begin{array} { c c c l } 
\text { FinI } & \text { Fixed Rate } & { \text { Floating } } \
\text { A } & \$ 10.3 \% & \text { Prime } + 1\%\
\text { B } & \$ 8.9 \% & \text { Prime } + 1 / 2\%
\end{array}$$ For your swap (the one you have shown above)how would the swap bank quote the swap against prime? (Hint: they are quoting a bid-ask spread against "flat" prime.)

Quizplus · Accepted Answer

The Answer of Consider the borrowing rates for Parties A and B.A wants to finance a $100,000,000 project at a fixed rate.B wants to finance a $100,000,000 project at a floating rate.Both firms want the same maturity,5 years.
 $$\begin{array} { c c c l } 
\text { FinI } & \text { Fixed Rate } & { \text { Floating } } \
\text { A } & \$ 10.3 \% & \text { Prime } + 1\%\
\text { B } & \$ 8.9 \% & \text { Prime } + 1 / 2\%
\end{array}$$ For your swap (the one you have shown above)how would the swap bank quote the swap against prime? (Hint: they are quoting a bid-ask spread against "flat" prime.)

Consider the Borrowing Rates for Parties a and B For Your Swap (The One You Have Shown Above)how Would