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solution.
1. Nixon Industries is currently paying a fixed rate 4% on a loan and desires a variable rate loan payment exposure. Refinancing is currently not available, so Nixon Industries decide to pursue an interest rate swap agreement. The swap terms are LIBOR for 2.5%. After the swap, are Nixon Industries’ payments variable or fixed?
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Fixed |
2. Nixon Industries is currently paying a fixed rate 4% on a loan and desires a variable rate loan payment exposure. Refinancing is currently not available, so Nixon Industries decide to pursue an interest rate swap agreement. The swap terms are LIBOR for 2.5%. Which is the after-swap loan cost for Nixon Industries?
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– 6.5% |
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– 1.5% |
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– (L + 1.5%) |
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– (L + 6.5%) |
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