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6. 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

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6. 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. The Swap dealer takes a profit of .5% and the remaining savings is split equally between the two parties. Specify what rate each party will pay and receive from the dealer and how the dealer will lock in their profit. Pay Receive Savings/Profit Company A: Dealer w/ Company A: Company B: Dealer w/ Company B

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