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Question 4 1 pts You have borrowed $3 million at a rate of LIBOR +2%, and you wish to completely eliminate your interest ratePlease show work

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Answer #1

Rate at which amount borrowed =LIBOR +2%

To eliminate risk a interest rate swap entered where we will received floating rate and pay fixed rate.

Received under swap = LIBOR +1.8

Pay under swap =3%

Net interest rate = Total interest rate for payment - Total interest rate received

=LIBOR +2% +3%-(LIBOR+1.8%) i.e.3.2%

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