Company A can borrow at either an 8.5% fixed rate or a floating rate of prime + 1.75% Company B can borrow at either a floating rate of prime + 1.25% or a fixed rate of 8.65% Company A prefers a floating rate and Company B prefers a fixed rate. Which one of the following terms would be acceptable to both Company A and B if they opted to enter an interest rate swap?

Multiple Choice

a. 8.6% fixed for prime + 1.2% floating

b. 8.65% fixed for prime + 1.3% floating

c. 8.65% fixed for prime + 1.25% floating

d. 8.5% fixed for prime + 1.75% floating

e. 8.6% fixed for prime + 1.3% floating