Winter Corp. can invest at a fixed rate of 7.5% or at a floating rate of LIBOR+2.4%. Spring Corp. can invest at a fixed rate of 8.3% or at a floating rate of LIBOR+2.1%. Winter Corp. wants to invest at a fixed rate and Spring Corp. wants to invest at a floating rate. Design a swap that takes advantage of the corporations comparative advantages in investing, benefits both firms equally, and nets an intermediary 20 bps per year. What interest rates will each party pay to the intermediary?

A.

Winter pays 5.55%, Spring pays LIBOR

B.

Winter pays LIBOR; Spring pays 5.75%

C.

Winter pays LIBOR; Spring pays 7.95%

D.

Winter pays 7.50%; Spring pays LIBOR