Two Companies Would Like to Borrow Money

Multiple Choice

Two companies would like to borrow money. Company A is offered a fixed rate of 6% and a floating rate of the BA rate (= the current yield on Bankers' Acceptances) + 1.25%. Company B is offered a fixed rate of 7% and a floating rate of the BA rate + 0.25%. Given this information, which of the following statements is correct?

A) Both companies can benefit from a swap given this information
B) Company B would benefit from a swap with Company A, but Company A cannot benefit from a swap.
C) Neither company can benefit from a swap given this information
D) Company A would benefit from a swap with Company B, but Company B cannot benefit from a swap.