Company A desires a fixed-rate, long-term loan. Company A presently has access to floating interest rate funds at a margin of 1.5% over LIBOR. Its direct borrowing cost is 13% in the fixed-rate bond market. In contrast, company B, which prefers a floating-rate loan, has access to fixed-rate funds at 10.5% and floating-rate funds at LIBOR+1%. Both companies enter into an interest rate swap with Bank C. Based on the swap, Bank C would gain 0.6% and the two companies would split the remaining spread differential equally. With the swap deal, what interest rate would Company B pay for its floating-rate funds?

Select one:

a. LIBOR+.7%b. LIBOR+.3%c. LIBOR+1.5%d. LIBOR+1.2%e. LIBOR-1%f. LIBOR-.6%