Company a Can Borrow at a Fixed Rate of 9

question 26

Essay

Company A can borrow at a fixed rate of 9.5% and variable rate of Prime plus 1%.Company A prefers a fixed rate.Company B can borrow at 8% fixed rate and Prime plus 2%.Company B prefers a variable rate.Determine whether an interest rate swap will be beneficial to both parties..

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Definitions:

Social Norms

Accepted behaviors that are considered standard within a group or society.

Cognitive Dissonance

The psychological discomfort experienced when holding two or more conflicting cognitions (ideas, beliefs, values, or emotional reactions).

Central Route To Persuasion

A method of persuasion that involves deeply processing the content of the message, leading to lasting attitude change.

Community

A group of people living in the same place or having a particular characteristic in common, or a feeling of fellowship with others as a result of sharing common attitudes, interests, and goals.