Company A can borrow at either an 8.5% fixed rate or a floating rate of prime + 1.75% Company B can borrow at either a floating rate of prime + 1.25% or a fixed rate of 8.65% Company A prefers a floating rate and Company B prefers a fixed rate. Which one of the following terms would be acceptable to both Company A and B if they opted to enter an interest rate swap?

Company A can borrow at either an 8.5% fixed rate or a floating rate of prime + 1.75% Company B can borrow at either a floating rate of prime + 1.25% or a fixed rate of 8.65% Company A prefers a floating rate and Company B prefers a fixed rate. Which one of the following terms would be acceptable to both Company A and B if they opted to enter an interest rate swap?

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 4P

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Question

Company A can borrow at either an 8.5% fixed rate or a floating rate of prime + 1.75% Company B can borrow at either a floating rate of prime + 1.25% or
a fixed rate of 8.65% Company A prefers a floating rate and Company B prefers a fixed rate. Which one of the following terms would be acceptable to
both Company A and B if they opted to enter an interest rate swap?
Multiple Choice
8.65% fixed for prime + 1.3% floating
8.5% fixed for prime + 1.75% floating
8,6% fixed for prime + 1.3% floating
8,65% fixed for prime + 1.25% floating
8.6% fixed for prime + 1.2% floating

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