Company A needs $30 million at a floating-rate to fund a 5-year project while Company B desires $30 million at a fixed rate to complete its 5-year construction plans. Company A and Company B have been offered the following rates per annum on a $30 million 5-year loan:

Fixed rate Floating rate

Company A: 12.0% LIBOR + 0.1%

Company B: 13.4% LIBOR + 0.6%

1. Use the folowing diagram to design a swap that will net a bank, acting as intermediary, 0.1% per annum and that will appear equally attractive to both companies. Select the correct value for the interest rates that correspond to lines A through F (note there are fewer lines than available responses).

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E Company $30m Swap Bank B Company B $30m F