3. (a) Company A has been offered the rates shown in Table 1. It can borrow for three years at 6.45%. What floating rate can it swap this fixed rate into? (b) Company B has been offered the rates shown in Table 1. It can borrow for 5 years at LIBOR plus 75 basis points. What fixed rate can it swap this floating rate into? Table 1. Bid and offer fixed rates in the swap market and swap rates (percent per annum). Maturity (years) Bid Offer Swap rate 2 6.03 6.06 6.045 3 6.21 6.24 6.225 4 6.35 6.39 6.370 5 6.47 6.51 6.490 7 6.65 6.68 6.665 10 6.83 6.87 6.850 (a) Company A can pay LIBOR and receive 6.21% for three years. It can therefore exchange a loan at 6.45% into a loan at LIBOR plus 0.24% or LIBOR plus 24 basis points (b) Company B can receive LIBOR and pay 6.51% for five years. It can therefore exchange a loan at LIBOR plus 0.75% for a loan at 7.26%