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%

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Definitions:

Organic Product

A compound or substance that has been prepared or is obtainable by chemical reactions involving organic precursors.

Reaction Sequence

A specific series of chemical reactions that leads to the synthesis of desired compounds.

Butanoic Acid

A carboxylic acid with the formula C4H8O2, known for its unpleasant odor, found naturally in plant and animal fats.

2-Pentanone

A five-carbon ketone with the formula CH3COCH2CH2CH3, used as a solvent in various industrial applications.