Question: Question attached. Need the answer as soon as possible please. Thanks! Company A desires a fixed-rate, long-term loan. Company A presently has access to floating

 Question attached. Need the answer as soon as possible please. Thanks!

Question attached. Need the answer as soon as possible please.

Thanks!

Company A desires a fixed-rate, long-term loan. Company A presently has access

Company A desires a fixed-rate, long-term loan. Company A presently has access to floating interest rate funds at a margin of 1.5% over LIBOR. Its direct borrowing cost is 13% in the fixed-rate bond market. In contrast, company B, which prefers a floating-rate loan, has access to fixed-rate funds at 10.5% and floating-rate funds at LIBOR+1%. Both companies enter into an interest rate swap with Bank C. Based on the swap, Bank C would gain 0.6% and the two companies would split the remaining spread differential equally. With the swap deal, what interest rate would Company B pay for its floating-rate funds? Select one: a. LIBOR+.3% b. LIBOR+1.5% c. LIBOR-1% d. LIBOR+.7% e. LIBOR-.6% f. LIBOR+1.2%

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!