Firm A can borrow at 5% fixed or at Libor plus 0.5% in the fixed and floating rate markets, respectively. Firm B can borrow at 7% fixed or Libor plus 1% in the fixed and floating rate markets, respectively. A wants to borrow floating and B wants to borrow fixed. If A borrows fixed and B borrows floating and they enter into a fixed-for-Libor interest-rate swap in which A pays Libor flat, what swap rate would you suggest to the two firms if you were an unbiased advisor?

Group of answer choices

6%

5%

5.50%

5,25%