A Firm Can Borrow at a Floating Rate of LIBOR

question 90

Multiple Choice

A firm can borrow at a floating rate of LIBOR + 2.5% on short-term loans.It swaps its short-term payments so that it receives LIBOR + 1.25% and pays a fixed rate of 3.75%.If the notional principal is $100 million,what is the amount the firm pays under the swap?

• A)$1.25 million
• B)$2.5 million
• C)$3.75 million
• D)$5 million
• E)$7.5 million

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Definitions:

Dura-Europos

Dura-Europos was an ancient Hellenistic, Parthian, and Roman border city located in present-day Syria, known for its well-preserved ruins that offer insights into early Christian, Jewish, and Pagan communities.

Roman State

Refers to the period of classical antiquity associated with the Roman Republic and later the Roman Empire, characterized by its governance, culture, and expansion.

Patronage

The support, encouragement, and financial aid that individuals or organizations provide to artists, musicians, and writers.

Sarcophagus of Junius Bassus

An early Christian sarcophagus richly decorated with biblical scenes, notable for its sculptural quality and theological themes.