We consider two rms A and B that have the same nancial needs in terms of maturity and principal. The two rms can borrow money in the market at the following conditions:

Firm A: 11% at a xed rate or Libor + 2% for a $10 million loan and a 5-year maturity.

Firm B: 9% at a xed rate or Libor + 0.25% for a $10 million loan and a 5-year maturity.

1. We suppose that rm B prefers a oating-rate debt as rm A prefers a xedrate debt. What is the swap they will structure to optimize their nancial conditions?

2. If rm B prefers a xed-rate debt as rm A prefers a oating-rate debt, is there a swap to structure so that the two rms optimize their nancial conditions? Conclude