Company a Can Borrow at Either an 8

question 49

Multiple Choice

Company A can borrow at either an 8.5% fixed rate or a floating rate of prime + 1.75% Company B can borrow at either a floating rate of prime + 1.25% or a fixed rate of 8.65% Company A prefers a floating rate and Company B prefers a fixed rate. Which one of the following terms would be acceptable to both Company A and B if they opted to enter an interest rate swap?

• A) 8.5% fixed for prime + 1.75% floating
• B) 8.6% fixed for prime + 1.2% floating
• C) 8.6% fixed for prime + 1.3% floating
• D) 8.65% fixed for prime + 1.3% floating
• E) 8.65% fixed for prime + 1.25% floating

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Definitions:

Range

The difference between the highest and lowest values in a data set, giving an indication of the data's dispersion or variability.

Median

The middle value in a set of numbers, which separates the higher half from the lower half.

Standard Deviation

A statistical metric that quantifies the spread or variability of a dataset, highlighting how far individual measurements deviate from the dataset's mean on average.

Mean

The average of a set of numerical values, calculated by adding them together and dividing by the number of values.