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can anyone help with this one question? Able Inc. and Baker Inc. face...

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Accounting

can anyone help with this one question?

Able Inc. and Baker Inc. face the following borrowing costs in the fixed and floating rate markets:

Fixed?Rate Market Floating Rate Market

Baker T + 1. 95% L + 0.30%

Able T + 0.65% L ? 0.15%

1.3% .15%

Each firm desires the rate other than that for which it has comparative advantage.

A dealer stands ready to enter into a swap as either a fixed?rate payer or floating-rate receiver (or vice versa). The dealer will pay a fixed T+1.22% against LIBOR or receive T+1.30% against LIBOR. Assume that each firm borrows in the market in which it has comparative advantage and enters into a swap agreement. Analyze the potential gains from swapping for all parties under the following headlines:

b. What does the swap dealer earn?

0.08%

0.13%

-0.07%

0.23%

0.07%

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