Counterparty A is BBB-rated and can borrow at a fixed rate of 8.5% or at a floating rate of LIBOR + 0.5%. Counterparty B is AAA-rated and can borrow at a fixed rate of 7% or floating rate of LIBOR. If these two counterparties were to undertake an interest rate swap, then the potential savings for both counterparties is:

Select one:

a. 1%

b. 3%

c. LIBOR + 0.5%

d. 2%

e. 4%