Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Desert trading company has issued $100 million worth of long-term bonds at a fixed rate of 9%. The firm then enters into an interest rate
Desert trading company has issued $100 million worth of long-term bonds at a fixed rate of 9%. The firm then enters into an interest rate swap where it pays a LIBOR rate of 6% and receives a fixed 6.2% on notional principal of $100 million. What is the firms effective interest rate on its borrowing?
***Answer is not 8.8%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started