Company a Can Borrow Money at a fiXed Rate of 9

question 299

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.