A Firm Can Borrow at a Fixed Rate of 6

question 105

Multiple Choice

A firm can borrow at a fixed rate of 6.5% on long-term loans.If it swaps its long-term payments so that it receives 4% and pays a floating rate of LIBOR,what is the rate of interest on its borrowing?

• A)LIBOR + 2.5%
• B)LIBOR
• C)LIBOR + 6.5%
• D)LIBOR - 2.5%
• E)LIBOR - 4%