Suppose companies A and B have been offered the following rates per annum on a $100 million three-year loan:

Fixed Rate Floating Rate

Company A 4.0% LIBOR + 0.3%

Company B 5.4% LIBOR + 0.8%

a. Which company has a comparative advantage in the floating rate market?

b. What is the total gain to all parties?

c. Design a swap that will net a financial intermediary 0.1% per year that will appear equally attractive to both parties, and report the final borrowing costs for each company.