A Firm Can Borrow at a Floating Rate of LIBOR

question 90

Multiple Choice

A firm can borrow at a floating rate of LIBOR + 2.5% on short-term loans.It swaps its short-term payments so that it receives LIBOR + 1.25% and pays a fixed rate of 3.75%.If the notional principal is $100 million,what is the amount the firm pays under the swap?

• A)$1.25 million
• B)$2.5 million
• C)$3.75 million
• D)$5 million
• E)$7.5 million

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Definitions:

Lengthened

Describes something that has been made longer in duration or size.

Telomere

A region of repetitive nucleotide sequences at the end of a chromosome, which protects the end of the chromosome from deterioration.

Guanine-rich DNA

Sections of DNA sequences that are high in guanine content, often playing crucial roles in forming G-quadruplex structures with implications in regulation and stability of the genome.

Noncoding Sequences

DNA sequences that do not code for proteins but may have regulatory roles or be involved in RNA production.