You work at the interest rate swaps desk of the treasury division of Mega Bank.

Posted: January 10th, 2022

You work at the interest rate swaps desk of the treasury division of Mega Bank. Two companies have approached the bank, each seeking to enter into a $1 million intermediated interest rate swap. You have ascertained the following information in relation to the borrowing capacity of each company:

You construct a swap that will benefit all parties based on the following conditions:

• The bank will obtain a spread of 0.10 per cent.

• The beneficial gains will be allocated 60.00 per cent to company Q and 40.00 per cent to company P.