Companies A and B have been offered the following rates per annum on a $20 million five-year loan:

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Fixed Rate Floating Rate

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Company A 13.00% LIBOR + 0.4%

Company B 15.00% LIBOR + 0.8%

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Company A requires a floating-rate loan; Company B requires a fixed-rate loan. A bank, acting as intermediary, will net 0.2% per annum in a swap. What rates of interest will A and B end up paying after the swap?

Answer:

A LIBOR 0.3%

B 14.30%