IBM and AT&T Decide to Swap $1 Million Loans

question 8

Multiple Choice

IBM and AT&T decide to swap $1 million loans.IBM currently pays 9.0% fixed and AT&T pays 8.5% on a LIBOR + 0.5% loan.What is the net cash flow for IBM if they swap their fixed loan for a LIBOR + 0.5% loan and LIBOR rises to 8.5%?

• A) -$50,000
• B) $50,000
• C) -$90,000
• D) 0

---

Definitions:

Fingernails

Hard, flat structures covering the tips of the fingers in humans and other primates, composed largely of keratin.

Anxiety

A sense of tension or concern, generally caused by an impending event or an outcome that is undecided.

Reinforcement

In psychology, a consequence applied to an organism's behavior that increases the likelihood of the behavior recurring in the future.

Learning Through Observation

Acquiring new behaviors, skills, or information through watching others, also known as observational learning or social learning.