-What Rate Would Company a Have to Pay on Its

question 11

Multiple Choice

$\begin{array}{lll}&\text { Fixed-Rate } & \text { Floating-Rate } \\&\text { Borrowing Cost } & \text { Borrowing Cost }\\\text { Company: A} & 6 \% & \text { LIBOR } \\\text { Company: B} & 5 \% & \text { LIBOR }-0.5\end{array}$
-What rate would company A have to pay on its floating rate debt so that an interest rate swap would no longer benefit each party?

• A) LIBOR - 0.5
• B) LIBOR
• C) LIBOR + 0.5
• D) An interest swap is always beneficial for both parties involved.

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Definitions:

Cost-to-retail Ratio

The cost-to-retail ratio is a method used in inventory accounting to estimate the value of ending inventory using the ratio of cost to retail price.

Rising Prices

A situation in an economy where the general level of prices for goods and services increases over time.

Retail Inventory Method

An accounting method used by retailers to estimate inventory cost by calculating a cost-to-retail ratio.

FOB Destination

FOB Destination is a shipping term indicating the seller bears the shipping costs and maintains ownership until the goods reach the buyer's location.