Smith Brothers Has a flOating-Rate Loan Based on the LIBOR

question 117

Multiple Choice

Smith Brothers has a floating-rate loan based on the LIBOR rate. The Three Sisters has a floating- rate loan based on the Treasury bill. The Smith Brothers would prefer a loan based on the T-bill and
The Three Sisters would prefer a loan based on LIBOR, but neither have been able to obtain the
Loan they prefer. These two firms would most likely benefit if they entered a(n) :

• A) Forward contract on the dollar-pound exchange rate.
• B) Commodity swap.
• C) Exchange rate swap.
• D) Interest rate swap.
• E) Futures contract on the dollar-pound exchange rate.

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Definitions:

Phenylketonuria

A genetic disorder characterized by the body's inability to break down the amino acid phenylalanine, leading to potential brain damage and cognitive impairment.

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An inherited form of anemia in which there is an abnormality in the hemoglobin beta chains; the inheritance pattern is autosomal recessive.

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A genetic disorder affecting the lungs and digestive system, characterized by thick, sticky mucus that can lead to severe respiratory and digestive problems.

Tay-Sachs Disease

A genetic disorder characterized by the absence of a specific enzyme, resulting in the accumulation of fats in nerve cells, leading to death in early childhood.