Two companies, A and B, have the following borrowing rates:

Fixed Borrowing: 4.2% for A; 5.6% for B

Floating Borrowing: LIBOR+80 bps for A; LIBOR+120 bps for B

The two companies want to borrow in the markets that they do not have a comparative advantage. According to the comparative advantage argument, what is the net borrowing cost for A if the two companies enter into an interest rate swap and use a financial institution which charges 10 basis points. Assume that the total potential savings is split evenly?

A. LIBOR+80 bps

B. 3.75%

C. LIBOR+35 bps

D. 5.15%