A Firm Can Borrow at a Fixed Rate of 7

question 35

Multiple Choice

A firm can borrow at a fixed rate of 7.25% on long-term loans.If it swaps its long-term payments so that it receives 6.5% and pays a floating rate of LIBOR,what is the rate of interest on its borrowing?

• A)LIBOR + 7.25%
• B)LIBOR + 6.5%
• C)LIBOR - 0.75%
• D)LIBOR
• E)LIBOR + 0.75%

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Definitions:

Wind

Wind is the movement of air from areas of high pressure to low pressure, significantly influenced by the Earth's rotation, surface irregularities, and temperature differences.

River

A large natural stream of water flowing in a channel to the sea, a lake, or another river.

Glaciers

Glaciers are vast bodies of ice that form over eons from the accumulation and compaction of snow, significantly shaping the earth's landscape as they move.

Smooth Troughs

Linear and elongated depressions on the Earth's surface that are characterized by their smooth, rounded shapes.