Companies ABC and PQR have been offered the following rates per annum on their business loan:

	Fixed Rate	Floating Rate
ABC	10%	LIBOR + 2%
PQR	14%	LIBOR + 4%

ABC requires a floating -rate loan. PQR requires a fixed-rate loan. XYZ bank will act as an intermediary and net 1% per annum in a swap.

1) Calculate net gain from a swap that will appear equally attractive to both companies. 2) What rates of interest will ABC and PQR end up paying after the swap? Please show calculations.

3) Diagrammatically present the swap in a figure