The CFO of Rijkens Radio, NV, Can Borrow Dollars at a Fixed

The CFO of Rijkens Radio, NV, can borrow dollars at a fixed rate of 8.5 percent per annum or floating at LIBOR + 2%. He prefers to borrow at a floating rate, but considers the rate too high. Rothwell Resources, plc, can borrow dollars at a fixed rate of 7.75 percent per annum and at a floating rate of LIBOR + 0.5%. The CFO of Rothwell wants to borrow at a fixed rate, but considers 7.75 percent to be too high. A broker offers to arrange a swap for the two companies for a fee of 0.25 percent. If the two companies split any gains from the swap equally, what type of loan debt service (fixed or floating) will the two companies end up with and at what rate?

A) Rijkens pays floating at LIBOR + 1.625%; Rothwell pays fixed at 7.375%
B) Rijkens pays floating at LIBOR + 1.75%; Rothwell pays fixed at 7.5%
C) Rijkens pays fixed at 7.375%; Rothwell pays floating at LIBOR + 1.625%
D) Rijkens pays fixed at 7.5%; Rothwell pays floating at LIBOR + 1.75%
E) None of the above.