A Firm Can Borrow at Fixed AA Rates Plus 1

question 37

Multiple Choice

A firm can borrow at fixed AA rates plus 1% for long-term loans.If it swaps its long-term payments so that it receives the fixed AA rate and pays a AA floating rate,what is the rate of interest on its borrowing if the floating rate is r%?

• A)r + 1%
• B)r - 1%
• C)r%
• D)1%
• E)2%

---

Definitions:

CFCs

Chlorofluorocarbons, a class of chemicals used in refrigerants and aerosols, which have been found to deplete the ozone layer.

Desertification

A progression where arable land turns into barren desert areas, usually caused by periods of dryness, the removal of trees, or improper agricultural methods.

Topsoil

Uppermost layer of soil; contains the most organic matter and plant nutrients.

Endemic

A term describing a species or condition regularly found and restricted to a certain area or population.