company A wishes to borrow 600 million euros for 5 years at a floating rate. the lowest rate at which it can raise sch a loan is euro libor + 0.75%.

the company's banker suggest that company B would be interested in a swap arrangement. company B needs the same amount of loan at a fixed rate.the lowest rate Company B van arrange is 10.5% per annum. it could, however, borrow in euros at floating rate of euro libor+1.5%.

company a can issue a fixed interest 5 year bond at 9% per annum instead.

the banker would charge a swap arrangement fee of 0.15% per year to both parties.

devise the swap benficial to both parties