Companies A and B have been offered the following rates per annum on a 20 million five-year loan: Fixed rate Floating rate Company 5.0% LIBOR+0.1% A Company 6.4% LIBOR+0.6% B 1) Company A requires a floating-rate loan; company B requires a fixed-rate loan. Design a swap that will net a bank, acting as intermediary, 0.1% per annum and that will appear equally attractive to both companies. (5 marks) 2) Discuss the possible reasons that company A and B prefer to enter into the swap contract. (5 marks) 3) Identify and discuss the comparative advantage possessed by both companies. (5 marks) 4) Should the spreads between the rates offered to Company A and B be different in fixed and floating markets? Explain why the comparative advantage cannot be arbitraged away. (5 marks)