Amazon would like to get a floating rate loan $10,000,000. It can borrow at 7.93% or Libor + 1%. A swap bank quotes 7.49 - 7.65 against flat Libor. How much can Amazon save (in basis points) by entering a swap agreement? 56

Amazon would like to get a floating rate loan $10,000,000. It can borrow at 7.93% or Libor + 1%. A swap bank quotes 7.49 - 7.65 against flat Libor. How much can Amazon save (in basis points) by entering a swap agreement? 56

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter24: Enterprise Risk Management

Section: Chapter Questions

Problem 10MC

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Question

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Amazon would like to get a floating rate loan $10,000,000. It can borrow at 7.93% or
Libor + 1%. A swap bank quotes 7.49 - 7.65 against flat Libor. How much can Amazon
save (in basis points) by entering a swap agreement?
56

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