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Company A borrowed at 8.5% fixed and company B borrowed at prime +1.25% on the...

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Company A borrowed at 8.5% fixed and company B borrowed at prime +1.25% on the same notional amount and the same maturity. A is willing to swap its fixed rate with a variable rate as high as prime +1.75% and B is interested to exchange its variable rate with a fixed rate as high as 8.65%. Which one of the following terms would be acceptable to both Company A and B if they opted to enter an interest rate swap with a dealer? [Hint: the appropriate option helps both companies to obtain better rates and the dealer to obtain profit.] Select one: a. "B" pays 8.50% fixed and "A" pays prime +1.25% floating b. "B" pays 8.55% fixed and "A" pays prime +1.15% floating c. "B" pays 8.65% fixed and "A" pays prime +1.10% floating d. "B" pays 8.60% fixed and "A" pays prime +1.30% floating

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