KESHI CO (DEC 14)

in the question KESHI CO (DEC 14) part (A), for calculating 5.04% in the answer sheet it will be 0.8%(Saving of both parties) x 70% = 0.56 therefore 5.5-0.56+0.1 = 5.04% However the question is asking the saving saving Keshi Co only which Keshi Co's saving is only 0.5% not 0.8%. 0.8% is the saving for both Keshi Co and Rozu Bank ( i have laid out calculation why Keshi Co's saving is 0.5%) (BP will be basis point) Keshi Rozu Actual borrowing ( LIBOR + 40BP) (4.6%) K to R LIBOR (LIBOR) R to K (4.6%) 4.6% interest after swap (5%) (LIBOR) open market cost(-no swap ) 5.5% LIBOR + 3% Saving 0.5% 0.3% Therefore my questions are 1. WHen we multiply 70% of any benefits, shouldn't we multiply with 0.5%(not 0.8%) since we are calculating the proportion of saving for Keshi not with Rozu Bank ??? 2. Moreover for savings for each party, is it always equally distributed ? like in the calculation shown above indicates that Keshi will have more saving but do we add both parties' saving and equally distribute between 2 parties ???