A Firm Can Borrow at a Floating Rate of LIBOR

question 48

Multiple Choice

A firm can borrow at a floating rate of LIBOR + 2.5% on short-term loans.If it swaps its short-term payments so that it receives LIBOR + 1.25% and pays a fixed rate of 3.75%,what is the rate of interest on its borrowing?

• A)5.00%
• B)3.75%
• C)7.50%
• D)2.50%
• E)1.25%

---

Definitions:

Nitrosoureas

A class of chemotherapy drugs used to treat various types of cancer, known for their ability to cross the blood-brain barrier.

Intrathecal Chemotherapy

A type of chemotherapy where drugs are injected directly into the cerebrospinal fluid bathing the brain and spinal cord.

Methotrexate

A medication used in treating various types of cancer and autoimmune diseases by inhibiting the growth of rapidly dividing cells.

Cytarabine

A chemotherapy drug used to treat certain kinds of leukemia and lymphomas.