Two companies have investments which pay the following rates of interest:
Firm A : 6% (fixed)
: Libor (float)
Firm B: 8% (fixed)
: Libor 0.5% (float)
Assume A prefers a fixed rate and B prefers a floating rate. If an intermediary charges both parties equally a 0.1% fee and any benefits are spread equally between Firm A and Firm B. If an intermediary charges both parties equally a 0.1% fee and any benefits are spread equally between Firm A and Firm B, what rates could A and B receive on their preferred interest rate? Show all workings.