A Firm Can Borrow at Fixed AA Rates for Long-Term

question 22

Multiple Choice

A firm can borrow at fixed AA rates 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% and the fixed rate is 1%?

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

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Definitions:

Task Decisions

Decisions that relate specifically to the execution or planning of tasks within an organization or project.

Powerful Stakeholders

Individuals or groups that hold significant influence, resources, or power within or outside an organization, affecting its decisions and actions.

Collective Responsibility

Collective responsibility is the doctrine or principle that each member of a group shares responsibility for the actions or outcomes of the group as a whole, emphasizing mutual accountability.

Mediating Variables

Variables that explain the relationship between two other variables, usually serving as an intermediary or mechanism through which an effect occurs.