Company A is an AAA-rated firm desiring to issue five-year Floating-rate notes (FRNs). It finds that it can issue FRNs at six-month LIBOR - 1/4 percent or at the six-month Treasury bill rate + percent. Given its asset structure, Treasury Bill rate is the preferred index. Company B is an A-rated firm that also desires to issue five-year FRNs. It finds it can issue at six-month LIBOR + 9/8 percent or at six-month Treasury bill rate + 7/8 percent. Given its asset structure, the six-month LIBOR rate is the preferred index. Assume a notional principle of $30,000,000. Assume the swap bank receives 1/8 percent and Company A share 60% of Quality Spread Differential (=QSD) and Company B shares the remaining 40% of QSD. Also, assume that Company A pays six-month Treasury bill rate + percent to swap bank and the swap bank pays the Treasury bill rate + 1/4 percent to Company B. What is the annual interest savings per year for Company A?

1. $15,750
2. $1,575,000
3. $157,500
4. $1,575
5. None of the above.