COMPANY A prefers a fixed interest rate and COMPANY B a variable interest rate.

The following information is known about the borrowing opportunities for both companies:

Company A Company B

Fixed interest 4% 6%

Variable interest LIBOR + 1% LIBOR + 1.5%

Based on the above information (no calculations required):

Select one:

a.

An interest rate swap could be beneficial to both parties if COMPANY A agrees to exchange variable rate loan payments for fixed rate payments from COMPANY B.

b.

Company A takes out a loan for company B itself

c.

Companies A and B may enter into an interest rate option agreement

d.

Intressimra swap ei ole tenoliselt kasulik ETTEVTE A-le, sest tal on vimalus finantseerida ennast nii fikseeritud kui ka muutuva intressimraga soodsamalt kui ETTEVTE B