What is the net interest rate for Walmart if the firm enters into a swap with the investment bank?
Suppose that Walmart has 3-year floating rate debt with an interest rate or LIBOR + 12bps, but the firm would prefer to pay a fixed rate. An investment bank is offering a fixed swap rate of 1.016% and the floating rate for any swap will be LIBOR. What is the net interest rate for Walmart if the firm enters into a swap with the investment bank?
| A. | 1.136% | |
| B. | 1.030% | |
| C. | LIBOR – 17bps | |
| D. | 0.896% |
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