consider two companies, A and B who can borrow at the following annualised rates:

	Fixed	Floating
Company A	4.5%	6 month LIBOR + 0.1%
Company B	6.0%	6 month LIBOR + 0.6%

1. Suppose Company A wants to borrow floating and Company B wants to borrow fixed. What is the potential gain if they enter into a swap? Show your calculations.

2. Design a swap (illustrate with a diagram) that will net a bank, acting as intermediary, 0.2% per annum and will appear equally attractive to A and B. Calculate the interest payment for each company after the swap.