ABC Corp. and XYZ Corp., sister companies, would both like to acquire borrowings of the same amount and term. ABC was offered a fixed rate of 10% or a variable rate of 10-year Treasury bond rate plus 6% by its bank. XYZ was offered a fixed rate of 8% or a variable rate of 10-year Treasury bond rate plus 5% by its own bank. ABC prefers a fixed rate while XYZ prefers a variable rate. Under ideal circumstances and with the potential of using an interest rate swap, what would the effective interest rate be for ABC's loan?

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Under ideal circumstances the effective interest rate for ABC s loan would be ... View the full answer