A Firm Agrees to Accept Payments on a $1 000,000

question 1

Multiple Choice

A firm agrees to accept payments on a $1 000,000 loan with a fixed interest rate of 8% in exchange for making the payments on a loan with floating rate payments based on LIBOR.Payments are interest only with principal due in 10 years.The firm will benefit

• A)if LIBOR falls.
• B)if LIBOR rises.
• C)if LIBOR remains unchanged.
• D)if LIBOR fluctuates randomly.

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