Firm B, with a better credit rating, has lower borrowing costs in both types of borrowing. Firm A and Firm B face the following rate structure: Firm A Firm B Preferred Fixed Floating Fixed Rate Market 8.0% 6.0% Floating Rate Market 6-month LIBOR+0.5% 6-month LIBOR a) In what type of borrowing does Firm A have a comparative advantage? Why? b) In what type of borrowing does Firm have a comparative advantage? Why? c) What is the maximum cost savings through a swap? d) Devise a swap agreement (without a swap bank) such that A will have a cost saving of 1%. Compute the after-swap borrowing costs for Firm A and Firm B, and also determine cost savings for both firms. Cost Savings for Firm A = Cost Savings for Firm B = Before-Swap Borrowing Cost for Firm A for its preferred type of loan = After-Swap Borrowing Cost for Firm A = Before-Swap Borrowing Cost for Firm B for its preferred type of loan = After-Swap Borrowing Cost for Firm B =