Question 3 - Long- and Short-Term MNC Financing (22 Points) Two firms plan to issue bonds: Company A, which is a high-rated firm, and Company B, a low rated firm. Assume that the rates these companies would pay for issuing either Aloating rate or fixed rate bonds are as follows: Fixed Rate Bond Floating Rate Bond Company A 5% LIBOR + 0.5% Company B 7% LIBOR + 2% a. Is there a mispricing in the markets? Why? (3 points) b In which market (fixed rate or floating rate) does Company A have a comparative advantage? What about Company B? (3 points) c. What would be the total gain for both companies from entering a swap? (3 points) d. Design a swap agreement between the two companies in which Company A obtains 50% of the gains, while Company B 50% of the gains. Important: Provide an illustration with all transactions that occur and the logic behidd. (13 points)