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.

---

Definitions:

Cash Sales

Transactions where payment is made in cash at the time of purchase, without the use of credit.

Budget Manual

A comprehensive guide that outlines the procedures, policies, and responsibilities associated with the budgeting process in an organization.

Budget Procedures

The set of processes and guidelines a business or organization follows to create, implement, and monitor its budget.

Budget Schedule

A detailed plan that outlines a company's financial and operational goals over a specific period, often including expected revenues, expenses, and cash flows.