A Firm Can Borrow at a Floating Rate of LIBOR

question 71

Multiple Choice

A firm can borrow at a floating rate of LIBOR + 1% on short-term loans.It swaps its short-term payments so that it receives LIBOR + 2% and pays a fixed rate of 3%.If the notional principal is $50 million,what is the amount the firm pays under the swap?

• A)$1 million
• B)$1.5 million
• C)$2 million
• D)$2.5 million
• E)$3 million

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Definitions:

Sensory Nerves

Nerves that transmit sensory information from the body's periphery to the central nervous system, allowing the perception of stimuli like touch, temperature, and pain.

Penis

The male organ through which semen and urine pass.

Luteal Phase

The phase of the ovarian cycle during which a follicle becomes a corpus luteum and then degenerates.

Ovarian Cycle

The series of events in a female's body that occur from one menstruation to the next, involving ovulation and the preparation of the uterus for possible pregnancy.