Counterparty A can borrow from the floating rate market at LIBOR + 0.5% and Counterparty B can borrow from the Eurobond market at 7%. If Counterparty A pays 7.35% into the swap and Counterparty B pays the LIBOR rate plus 0.5% into the swap, then the overall cost to borrow by Counterparty B is:

a.

7.85%

b.

LIBOR + 0.5%

c.

7%

d.

LIBOR + 7.5%

e.

7.35%