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%

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Definitions:

Recognition

The act of acknowledging and valuing the contributions and achievements of individuals or groups.

Career Growth

The process of advancing one's career, often through higher job positions, increased responsibilities, further education, or skill development, leading to personal and professional satisfaction.

Need For Power

A manifest need that concerns the desire to influence others, change people or events, and make a difference in life.

McClelland's Need Theory

A motivational theory that suggests that human behavior is influenced by three dominant needs: the need for achievement, the need for affiliation, and the need for power.