Company a Can Issue Floating-Rate Debt at LIBOR + 1

question 2

Multiple Choice

Company A can issue floating-rate debt at LIBOR + 1% and can issue fixed rate debt at 9%.Company B can issue floating-rate debt at LIBOR + 1.5% and can issue fixed-rate debt at 9.4%.Suppose A issues floating-rate debt and B issues fixed-rate debt, after which they engage in the following swap: A will make a fixed 7.95% payment to B, and B will make a floating-rate payment equal to LIBOR to A.What are the resulting net payments of A and B?

• A) A pays a fixed rate of 9%, B pays LIBOR + 1.5%.
• B) A pays a fixed rate of 8.95%, B pays LIBOR + 1.45%.
• C) A pays LIBOR plus 1%, B pays a fixed rate of 9.4%.
• D) A pays a fixed rate of 7.95%, B pays LIBOR.
• E) None of the above answers is correct.

---

Definitions:

SQL

Structured Query Language, a programming language designed for managing and manipulating relational databases.

JavaScript

A high-level, interpreted scripting language widely used for creating and controlling dynamic website content.

HTML

Hypertext Markup Language, the standard markup language used to create and structure web pages and web content.

Spreadsheet

A digital document that uses columns and rows to organize data, calculations, and information, often used for accounting, budgeting, and managing data with formulas and functions.