Your Firm Can Borrow Fixed at 8% and Floating at Libor+1

question 27

Multiple Choice

Your firm can borrow fixed at 8% and floating at Libor+1%. You can also enter into a fixed-for-Libor swap where the fixed rate is 7.5% (and the swap has the same maturity as the borrowing) . What is the cheapest way for the firm to obtain fixed rate financing?

• A) Borrow at the fixed rate.
• B) Borrow at the fixed rate and then swap into floating rate using the swap.
• C) Borrow floating rate and then swap into fixed rate using the swap.
• D) Both (a) and (b).

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Definitions:

Action Potential

A temporary reversal of electrical charge across a cell membrane, leading to the transmission of nerve impulses.

Myelinated

Refers to axons that are covered with a fatty sheath called myelin, which increases the speed at which electrical impulses propagate along the nerve cell.

Axon Diameter

The thickness of the axon, which influences the speed of nerve impulse conduction.

Action Potential Speed

The rate at which an action potential, or a short-lasting event of electrical charge reversal in a neuron, travels along a nerve fiber.