How is it determined that the pay fixed side was 6%+100bps and receive side was 6%+120bps+LIBOR?
I feel like i could have easily confused pay fixed as 6%+120bps and receive as 6%+100+LIBOR
ABC Bond pays 6+1.2% (120 bps).fixed.
Draw a diagram. It helps.
Manager
Manager enters into Pay Fixed, Receive Floating Swap.
Pay Fixed -> 6% + 100 bps
Receive Floating
Receive Fixed from ABC Bond = + 6 + 120 bps
Pay Fixed on Swap = - (6 + 100 bps)
Receive Floating = + Libor
Net impact = LIBOR + 20 bps