Suppose you have the following rates for Company A and Company B

a. Which rate is favorable for each company? b. Design a swap agreement in which Company A is a fixed rate payer and Company B is a floating rate payer. First, design a swap agreement without a financial intermediary and the two parties share the surplus equally. Next, design a swap agreement with a financial intermediary and all the three parties share the surplus equally. c. Draw the diagram showing the transaction between these parties.

This paper has to be solved on paper, Diagram is mandatory and must be full and cover all points that is given in the question

Fixed rate Floating rate LIBOR + 1% 12% Company A LIBOR+5% 13% Company B