Question No 3
A company currently has a 6.25% fixed rate loan but it wishes to change
the interest style of the loan to variable by using an interest rate
swap directly with the bank. The bank has quoted the following swap
rate:
• 5.50
% - 5.55% in exchange for LIBOR LIBOR is currently 5%. If the company
enters into the swap and LIBOR remains at 5%, what will the company's
interest cost be? •
A. 5.00% •
B. 5.75% •
C.5.70% •
D. 6.25% •
Answer: B
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