rate swap where it pays a LIBOR rate of 7% and receives a fixed 5.5% on notional principal of $100 million. What is the firm's effective interest rate on its borrowing? (Round your answer to 1 decimal place.)
rate swap where it pays a LIBOR rate of 7% and receives a fixed 5.5% on notional principal of $100 million. What is the firm's effective interest rate on its borrowing? (Round your answer to 1 decimal place.)
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 9P
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![Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 10%. The firm then enters into an interest
rate swap where it pays a LIBOR rate of 7% and receives a fixed 5.5% on notional principal of $100 million. What is the firm's effective
interest rate on its borrowing? (Round your answer to 1 decimal place.)
Answer is complete but not entirely correct.
8.0
Effective interest rate](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd6a708a0-cab4-4f4a-bc34-d844cfb7d10c%2Faca0d117-bfcf-47de-9948-5b648c21f1a1%2Fpoitgrb_processed.png&w=3840&q=75)
Transcribed Image Text:Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 10%. The firm then enters into an interest
rate swap where it pays a LIBOR rate of 7% and receives a fixed 5.5% on notional principal of $100 million. What is the firm's effective
interest rate on its borrowing? (Round your answer to 1 decimal place.)
Answer is complete but not entirely correct.
8.0
Effective interest rate
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