Company X,a Low-Rated Firm,desires a Fixed-Rate,long-Term Loan

question 9

Multiple Choice

Company X,a low-rated firm,desires a fixed-rate,long-term loan.X presently has access to floating interest rate funds at a margin of 1.25% over LIBOR.Its direct borrowing cost is 11% in the fixed-rate bond market.In contrast,company Y,which prefers a floating-rate loan,has access to fixed-rate funds in the Eurodollar bond market at 9% and floating-rate funds at LIBOR + 1/4%.Suppose they split the cost savings.
-How much would X pay for its fixed-rate funds?

• A)9.5%
• B)10.0%
• C)10.5%
• D)10.75%

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Definitions:

Low-Context And Individualistic

Pertains to cultures where communication is explicit, relationships are less emphasized, and individual achievement and autonomy are highly valued.

High-Context And Collectivist

A descriptor for cultures or societies where communication relies heavily on the context and non-verbal cues, and where group needs are prioritized over individual ones.

Geocentric And Individualistic

A perspective that combines valuing global views without prioritizing any one culture and emphasizing the importance of individual rights and values.

Polychronic And Centralized

Describes an organizational or cultural approach favoring multitasking and a central point of control or decision-making.