What does the swap bank gain from these transactions

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A swap bank quotes the following pricing schedule for Polish zloty coupon swaps.

Coupon Swap Pricing Schedule (Polish zloty)

Maturity

Bank Pays Fixed Rate

Bank Receives Fixed Rate

Current TN Rate

4 years

4 yr TN sa + 24bps

4 yr TN sa + 78bps

7.98%

This schedule assumes nonamortizing debt and semiannual rates (sa). Quotes are against 6-month LIBOR Polish zloty flat.

TN = Polish Treasury note rate.

a. Ford Motor Company has 4-year floating rate zloty debt at 6-month LIBOR plus 45 bps. Ford wants to swap into fixed rate zloty debt. Describe Ford's floating-for-fixed zloty coupon swap.

b. Polish Motors (PM) has 4-year fixed rate zloty debt at 9.83 percent (BEY). PM wants to swap into floating rate zlotys. Describe PM's fixed-for-floating zloty coupon swap.

c. What does the swap bank gain from these transactions?

Reference no: EM13871856

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