A company can invest funds for five years at LIBOR minus 30 basis points.The five-year swap rate is 3%.What fixed rate of interest can the company earn by using the swap?
A) 2.4%
B) 2.7%
C) 3.0%
D) 3.3%

Name: A company can invest funds for five years at LIBOR minus 30 basis points.The five-year swap rate is 3%.What fixed rate of interest can the company earn by using the swap? A) 2.4% B) 2.7% C) 3.0% D) 3.3%
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Question

Quizplus · Accepted Answer

Company earns LIBOR-0.3%.It can pay LIBOR on a swap and receive 3%.This nets to 2.7%.

A Company Can Invest Funds for Five Years at LIBOR