Assume that Company A prefers variable to fixed rate debt while Company B prefers fixed to variable rate debt. Also assume that Companies A and B can borrow at the following rates:

	Fixed Rate	Floating (i.e., Variable) Rate
Company A	8%	LIBOR + 1%
Company B	10%	LIBOR + 1.5%

Companies A and B can both benefit from entering into an interest rate swap. For example, Company A can borrow at a fixed rate of 8% and Company B can borrow at a floating rate of LIBOR + 1.5%. They can then enter into an interest rate swap whereby Company A makes floating rate payments to Company B at LIBOR + 1% in exchange for fixed rate payments of 9% from Company B. What is the net effect of this swap, i.e., what is the interest rate that each company ultimately pays?