Questions 4 points Save an Company A and Company B both seek funding at the lowest possible cost. Company A would prefer the flexibility of floating rate borrowing, while Company B wants the security of fixed rate borrowing They face the following rate structure: Company B Credit Rating Fixed Rate of Borrowing Floating Rate of Borrowing Company A 8.5% 11% 6% 5% Company A wants floating rate debt and it could borrow at LIBOR+14; however it could borrow fixed at 8.5% and swap for a floating rate debt. Company B wants fixed rate so it could borrow fixed at 11% however it could borrow floating at LIBOR+2% and swap for foed rate debt. Company A borrows at the fixed rate and Company B borrows at the floating rate. Then they enterinto a swap agreement where Company B pays Company A 8.5% at the fixed rate and Company A pays Company B the UIBOR. Which one of the following statements is correct about the swap deal between the two companies? Company A expects the interest rates to rise in the future b. Company B has absolute advantage if it borrows at the fixed interest rate of 12% c Company B expects the interest rates to decline in the future d Company A expects the interest rates to decline in the future e Company B has comparative advantage if it borrows at the fixed interest rate of 12%