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 total potential savings for A and B if they enter into an interest rate swap and use a financial institution which charges 10 basis points?

	A.	90 basis points
	B.	110 basis points
	C.	80 basis points
	D.	120 basis points

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, if B borrows in the market that it has a comparative advantage, what is the borrowing rate of B?

	A.	5.6%
	B.	LIBOR+120 bps
	C.	4.2%
	D.	LIBOR+80 bps

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.	5.15%
	B.	LIBOR+35 bps
	C.	LIBOR+80 bps
	D.	3.75%