Company A can borrow money at a fixed rate of 7.5 percent or a variable rate set at prime plus 0.5 percent. Company B can borrow money at a variable rate of prime plus 1 percent or a fixed rate of 7 percent. Company A prefers a fixed rate and company B prefers a variable rate. Given this information, which one of the following statements is correct? Answer: Company A can swap with B and pay a fixed rate of 7.25 percent.

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