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14-13 Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 10%. The firm then enters into an interest

14-13

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Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 10%. The firm then enters into an interest rate swap where it pays a LIBOR rate of 7% and receives a fixed 5.5% on notional principal of $100 million. What is the firm's effective interest rate on its borrowing? (Round your answer to 1 decimal place.)

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