Show all work. Underline final answer. To receive full credit, you must draw swap

Directions:
Show all work. Underline final answer. To receive full credit, you must draw swap
diagrams. Assume annual payment on bonds and swaps.
Company A can borrow fixed at 14.3 percent and floating at LIBOR percent. Company B can
borrow fixed at 15.7 percent and floating at LIBOR+ 0.56 percent. A financial intermediary
charges a fee of 0.14 percent. Company A wishes to borrow floating and company B wishes to
borrow fixed. Assume the gain is evenly split between the two parties and floating rate legs are
LIBOR. Design the swap. What is the company A’s fixed rate leg and company B’s fixed rate
leg, respectively.