10. Company A can borrow money at a fixed rate of 7.5 percent or a variable rate set at prime plus 1 percent. Company B can borrow money at a variable rate of prime plus +.5 percent or a fixed rate of 8 percent. Company A prefers a variable rate and company B prefers a fixed rate. Which one of the following statements depicts the most favorable outcome of a swap between Companies A and B?

I know the answer is Company A could pay the variable prime rate + .75 percent.

Could somebody explain how this works?