Question: Exercise II . ( Total mark: 5 points ) . Consider two firms, A and B . Firm A can borrow money at a floating

Exercise II.(Total mark: 5 points). Consider two firms, A and B. Firm A can borrow money at a floating rate equal to EURIBOR \(+3\%\) or at a fixed rate of \(16\%\). Firm B can borrow money at EURIBOR \(+4\%\) or at a fixed rate of \(18\%\). The two firms could enter into a swap contract. Firm A decides to use the \(16\%\) fixed rate, while Firm B opts for the EURIBOR \(+4\%\).
Is there an arbitrage opportunity? Explain how an investment bank could exploit it.
Exercise II . ( Total mark: 5 points ) . Consider

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