Company X Wants to Borrow $10,000,000 Floating for 5 Years;

question 54

Multiple Choice

Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow $10,000,000 fixed for 5 years.Their external borrowing opportunities are shown here: $$\begin{array} { c c c } & \text { Fixed-Rate } & \text { Floating-Rate } \\&\text { Borrowing Cost } & \text { Bortowing Cost } \\\text { Compary X } & 10 \% & \text { LIBOR } \\\text { Compary Y } & 12 \% & \text { LIBOR } + 1.5 \%\end{array}$$ A swap bank proposes the following interest only swap:
Y will pay the swap bank annual payments on $10,000,000 with a fixed rate of rate of 9.90 percent.In exchange the swap bank will pay to company Y interest payments on $10,000,000 at LIBOR ? 0.15 percent; What is the value of this swap to company Y?

• A)Company Y will save 15 basis points per year on $10,000,000 = $15,000 per year.
• B)Company Y will save 45 basis points per year on $10,000,000 = $45,000 per year.
• C)Company Y will save 5 basis points per year on $10,000,000 = $5,000 per year.
• D)Company Y will only break even on the deal.

Understand the role of pattern, color, and symbolism in distinguishing artistic techniques and expressions.

Grasp the historical and cultural influences on the development of art and architecture during the period.

Understand the basic concepts and operations of data transfer in programmable logic controllers (PLCs).

Identify the relationship between input and output signals in closed-loop control systems.

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Definitions:

Controls

In experiments, a group that does not receive the treatment under study and is used as a benchmark to measure how the other tested groups do.

Abnormal Psychology

The scientific study of abnormal behavior undertaken to describe, predict, explain, and change abnormal patterns of functioning.

Research Method

Techniques, strategies, and tools used to identify, select, process, and analyze information about a subject.

Independent Variable

The variable in an experiment that is manipulated to determine whether it has an effect on another variable.