Question: MARCUS can issue floating-rate debt at LIBOR + 1% andfixed rate debt at 9%. REUTH can issue floating-rate debt at LIBOR + 1.5% andfixed-rate debt

MARCUS can issue floating-rate debt at LIBOR + 1% andfixed rate debt at 9%. REUTH can issue floating-rate debt at LIBOR + 1.5% andfixed-rate debt at 9.4%. Suppose MARCUS issues floating-rate debt and REUTH issues fixed-rate debt, after which they engage in the following swap: Marcus will make a fixed 7.95% payment to Reuth and Reuth will make a floating-rate payment equal to LIBOR to Marcus What are the resulting net payments of Marcus and Reuth?

*MARCUS pays a fixed rate of 7.95%, REUTH pays LIBOR.

*MARCUS pays a fixed rate of 8.95%, REUTH pays LIBOR + 1.45%.

*MARCUS pays a fixed rate of 9%, REUTH pays LIBOR + 1.5%.

*MARCUS pays LIBOR plus 1%, REUTH pays a fixed rate of 9.4%

*None of the above

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