Company a Can Borrow Money at a Fixed Rate of 7.5

question 54

Multiple Choice

Company A can borrow money at a fixed rate of 7.5 percent or a variable rate set at prime plus 0.5 percent.Company B can borrow money at a variable rate of prime plus 1 percent or a fixed rate of 7 percent.Company A prefers a fixed rate and company B prefers a variable rate.Given this information,which one of the following statements is correct?

• A)Company A can swap with B and pay a fixed rate of 7.25 percent.
• B)If Company A swaps with B, Company A could pay a fixed rate of 6.5 percent.
• C)If Company B swaps with A, Company B must pay a fixed rate of 8 percent.
• D)Company B can swap with A such that Company B pays the variable prime rate.
• E)There are no terms under which both Company A and Company B can swap interest rates and both realize a profit.

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Definitions:

Cytochrome C

A small heme protein found in the mitochondria of cells, playing a role in the electron transport chain and the process of cellular respiration.

Electron Transport Chain

A series of complexes that transfer electrons from electron donors to electron acceptors via redox reactions, and couples this electron transfer with the transfer of protons (H+ ions) across a membrane.

Amino Acid Sequence

The order in which amino acids are arranged in a protein, dictating the protein's structure and function.

Prokaryotes

Microorganisms characterized by the absence of a distinct nucleus and other organelles, including bacteria and archaea.