Companies A and B have received the following interest rate offers on a $20 million, fiveyear

loan:

Fixed rate per annum Floating rate per annum

Company A 12.4% LIBOR + 0.2%

Company B 13.0% LIBOR + 0.7%

Company A prefers a floating-rate loan and Company B prefers a fixed-rate loan. Design a

swap that will earn a bank, acting as intermediary, 0.1% per annum, and that will benefit

both companies equally. Diagrams are not required.