Company a Can Issue Floating-Rate Debt at LIBOR + 1%,and

question 3

Multiple Choice

Company A can issue floating-rate debt at LIBOR + 1%,and it can issue fixed rate debt at 9%.Company B can issue floating-rate debt at LIBOR + 1.5%,and it can issue fixed-rate debt at 9.4%.Suppose A issues floating-rate debt and B issues fixed-rate debt,after which they engage in the following swap: A will make a fixed 7.95% payment to B,and B will make a floating-rate payment equal to LIBOR to A.What are the resulting net payments of A and B?

• A)A pays a fixed rate of 9%; B pays LIBOR + 1.5%.
• B)A pays a fixed rate of 8.95%; B pays LIBOR + 1.45%.
• C)A pays LIBOR plus 1%; B pays a fixed rate of 9.4%.
• D)A pays a fixed rate of 7.95%; B pays LIBOR.

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Definitions:

Conflict of Interest

A situation where an individual's personal interests could improperly influence the performance of their duties or decision-making.

Dual Agency

A real estate transaction scenario in which a single agent or broker represents both the buyer and the seller, creating potential conflicts of interest.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another when managing another person’s assets, involving a relationship of trust and confidence.

Independent Contractor

An individual or entity contracted to perform work for another entity as a non-employee, responsible for their own taxes and benefits.