A company has a variable-rate loan with a bank paying LIBOR plus 65. The company wishes to create a synthetic fixed-rate loan and enters into an interest rate swap paying a swap fixed rate of 9% and receives LIBOR. The company also pays an annual swap spread of 35 base points to the swap dealer. Calculate the effective fixed rate on the synthetic fixed-rate loan.© BrainMass Inc. brainmass.com March 4, 2021, 5:43 pm ad1c9bdddf
The company receives the following cash flows:
<br>1. LIBOR (swap agreement receipt).
<br>Total receipts = ...
This solution calculates the effective fixed rate on a loan swap.