A Company and B Company need to raise funds to pay for capital improvements at their manufacturing plants. A Company is a well-established firm with an excellent credit rating in the debt market; it can borrow funds either at 11 percent fixed rate or at LIBOR + 1 percent floating rate. B Company is a fledgling start-up firm without a strong credit history. It can borrow funds either at 10 percent fixed rate or LIBOR + 3 percent floating rate.
a. If the amount each firm wants to borrow is 100,000,000 payable back in 3 years, can you describe how would you attempt to price the swap for the floating-rate payer firm?
b. What other information you would need for pricing the swap?
(Please give answers one by one, not just a table, please explain it)