The Miller Company and the Edwards Company both need to raise money to fund facilities improvements at their manufacturing plants in New York. Miller has been in business for 40 years and has a very good credit rating. It can borrow money at either 10 percent or at the LIBOR + .03 percent floating rate. The Edwards Company has experienced some financial distress recently and does not have a strong credit history. It can borrow funds at 15 percent or 2 percent over the LIBOR rate.

a. Is there an opportunity for the Miller Company and the Edwards Company to benefit from a swap?

b. Show how you would structure a swap transaction between Miller and Edwards