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

question 14

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 is involved and quotes the following rates five-year dollar interest rate swaps at 10.05 percent?10.45 percent against LIBOR flat. Assume both X and Y agree to the swap bank's terms.Fill in the values for A,B,C,D,E,& F on the diagram.

• A)A = LIBOR; B = 10.45%; C = 10.05%; D = LIBOR; E = LIBOR; F = 12%
• B)A = 10%; B = 10.45%; C = 10.05%; D = LIBOR; E = LIBOR; F = LIBOR + 1½%
• C)A = 10%; B = 10.45%; C = LIBOR; D = LIBOR; E = 10.05%; F = LIBOR + 1½%
• D)A = 10%; B = LIBOR; C = LIBOR; D = 10.45%; E = 10.05%; F = LIBOR + 1½%

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Definitions:

Postmodern Society

A social order characterized by a diverse, decentralized, and often skeptical approach to narratives of progress, truth, and the concept of a unified social theory.

Waning of Emotion

A concept referring to the perceived decline or diminution of emotional intensity or engagement in certain aspects of modern life.

Structuralism

A theoretical perspective in the humanities and social sciences focusing on the underlying structures that shape culture, society, and human cognition.

Poststructuralism

An intellectual movement critiquing the ability of our language and structures to fully represent or capture reality, emphasizing the instability of meaning.