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Company X, a lowrated firm, desires a fixedrate, longterm loan. X presently has access to floating interest rate funds at a margin of 1.25% over
- Company X, a lowrated firm, desires a fixedrate, longterm loan. X presently has access to floating interest rate funds at a margin of 1.25% over LIBOR. Its direct borrowing cost is 11.4% in the fixedrate bond market. In contrast, company Y, which prefers a floatingrate loan, has access to fixedrate funds in the Eurodollar bond market at 9% and floatingrate funds at LIBOR + 0.25%. Suppose they split the cost savings. How much would X pay for its fixedrate funds?
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| a. | 10.00% |
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| b. | 9.50% |
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| c. | 10.85% |
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| d. | 10.70% |
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Financial Management Principles And Applications
Authors: Arthur J. Keown
9th Edition
013033362X, 9780130333629
