1. If a firm has borrowed $5m at a floating rate of LIBOR + 75 basis points (0.75%), and then enters into a swap to
1.If a firm has borrowed $5m at a floating rate of LIBOR + 75 basis points (0.75%), and then enters into a swap to receive LIBOR and pay 6% fixed on $5m notional, what is the firm's effective interest rate on its borrowing?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the effective interest rate on the firms borrowing we need to c...
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Step: 2
Step: 3
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Authors: Laurence Booth, Sean Cleary
3rd Edition
978-1118300763, 1118300769
