Assume the following interest rates at which firms A and B can borrow:

	Fixed Rate	Floating rate
Firm A	8%	LIBOR+1%
Firm B	9%	LiBOR+1.6%
Premium paid by B over A	1%	.6%

Also assume that A ultimately wants a floating rate loan while B wants a fixed rate loan. Design an interest rate swap so that both can benefit. Estimate the profit for firm A and firm B in your design.

[Hint: There is no dealer involved. So, it is actually easier than the example in book. Start with drawing a swap diagram for two parties. Use arrows to show the flow of interest. Also, make sure that profits of A and B add up to the net profit from the swap]