Company a Can Borrow Money at a Fixed Rate of 9

question 252

Multiple Choice

Company A can borrow money at a fixed rate of 9% or a variable rate set at prime plus 1% Company B can borrow money at a variable rate of prime plus 2% or a fixed rate of 8.25% Company A prefers a fixed rate and company B prefers a variable rate. Given this information, which one of the following statements is correct?

• A) Company A can swap with B and pay a fixed rate of 8%
• B) If Company A swaps with B, Company A should end up paying a fixed rate between 8¼ % and 9%
• C) If Company B swaps with Company A then Company B will end up paying a fixed rate of 8%
• D) Company B can swap with Company A such that Company B receives a 9¼ % fixed rate.
• E) There are no terms under which both Company A and Company B can swap interest rates and both realize a profit.

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Definitions:

Services

Services involve non-tangible tasks performed for a fee, offering benefits, help, or satisfaction to customers without producing physical goods.

Account

An arrangement by which an individual or entity keeps track of their financial transactions and positions with another entity.

Accounting Records

Documents that businesses use to track their financial transactions and maintain financial accountability.

Journal

A record where all financial transactions are initially noted before they are posted to individual accounts in the ledger.