A company can raise funds for five years at a floating rate of LIBOR plus 75...
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A company can raise funds for five years at a floating rate of LIBOR plus 75 basis points, which will be reset every quarter. A LIBOR-based swap, with a 5-year term, with interest payments exchanged every quarter, and with a floating rate equal to the 3-month LIBOR rate, has a swap rate of 5.25%. Assume that the company's default risk rating is unchanged over a five-year period. At what effective fixed rate of interest can the company raise funds by using the swap ? A company can raise funds for five years at a floating rate of LIBOR plus 75 basis points, which will be reset every quarter. A LIBOR-based swap, with a 5-year term, with interest payments exchanged every quarter, and with a floating rate equal to the 3-month LIBOR rate, has a swap rate of 5.25%. Assume that the company's default risk rating is unchanged over a five-year period. At what effective fixed rate of interest can the company raise funds by using the swap ?
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Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
Posted Date:
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