A Firm Can Borrow at a Fixed Rate of 7

question 35

Multiple Choice

A firm can borrow at a fixed rate of 7.25% on long-term loans.If it swaps its long-term payments so that it receives 6.5% and pays a floating rate of LIBOR,what is the rate of interest on its borrowing?

• A)LIBOR + 7.25%
• B)LIBOR + 6.5%
• C)LIBOR - 0.75%
• D)LIBOR
• E)LIBOR + 0.75%

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