1. Companies A and B have been offered the following rates per annum on a $20 million five-year loan: (3pts) Company A Com Fixed Rate 5.00% 6.60% Floating Rate LIBOR + 0.1% LIBOR + 0.7% Company A requires a floating-rate loan, whereas Company B requires a fixed-rate loan. In which type of borrowing does Company A has a comparative advantage? Explain briefly a. b. In which type of borrowing does Company 8 has a comparative advantage? Explain briefly. c. What is the maximum cost savings that can be achieved through an interest rate swap? Design a swap that will enable both companies to share the cost savings equally. Draw a diagram to illustrate the swap. d. Using the swap constructed in (d), compute the after-swap interest cost for Company A and Company 8 for their preferred types of borrowing: and compute the cost savings for Company A and Company B. e