Explore BrainMass

Explore BrainMass

    Calculating effective fixed rate

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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 December 24, 2021, 4:47 pm ad1c9bdddf

    Solution Preview

    The company receives the following cash flows:
    <br>1. LIBOR (swap agreement receipt).
    <br>Total receipts = ...

    Solution Summary

    This solution calculates the effective fixed rate on a loan swap.