Jackson Inc., AAA rated, can issue 5-year $200 million bonds for 10% fixed or LIBOR + 3%.

Another company, Browne Corp., rated BB, can issue similar maturity bonds for 15% fixed or

LIBOR + 6%. Jackson Inc. prefers to borrow floating while Browne Corp. prefers fixed rate bonds.

Explain how a financial intermediary can arrange a fixed-for-floating swap that provides equal

savings to both companies while keeping 30 basis points for itself. State the savings of both

borrowers.

** savings in amount form**