Question
Companies A and B have been offered the following rates per annum on a $20 million 5-year loan, and a bank, acting as intermediary, will
Companies A and B have been offered the following rates per annum on a $20 million 5-year loan, and a bank, acting as intermediary, will charge 0.10% per annum (10 basis points) to arrange and manage the swap, which appears equally attractive to A and B. Fixed Rate Floating Rate Company A 6.0% LIBOR Company B 7.2% LIBOR + 0.50% Company A requires a floating-rate loan, and company B requires a fixed-rate loan. If Company A pays LIBOR to the bank, and the bank pays LIBOR to Company B, what is the net rate that company A will pay? Group of answer choices LIBOR + 0.30% LIBOR - 0.10% LIBOR - 0.30% LIBOR + 0.10%
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