TABLE 15.2
Use the information to answer following question(s).

-Refer to Table 15.2. For a swap agreement structured by Barclay's to benefit both Shell and Merck, which of the following must be true?
A) Barclay's must be willing to lend to Merck at a fixed rate of less than 7.50% and to Shell at a variable rate of less than LIBOR + 1/2%.
B) Barclay's must be willing to lend to Shell at a fixed rate of less than 8.00% and to Merck at a variable rate of less than LIBOR + 1/2%.
C) Barclay's must be willing to lend to Merck at a variable rate of less than 8.00% and to Shell at a fixed rate of less than LIBOR + 1/2%.
D) Barclay's must be willing to lend to Merck at a fixed rate of greater than 8.00% and to Shell at a variable rate of greater than LIBOR + 1/2%.

Question

TABLE 15.2
Use the information to answer following question(s).
 
-Refer to Table 15.2. For a swap agreement structured by Barclay's to benefit both Shell and Merck, which of the following must be true?
A) Barclay's must be willing to lend to Merck at a fixed rate of less than 7.50% and to Shell at a variable rate of less than LIBOR + 1/2%. 
B) Barclay's must be willing to lend to Shell at a fixed rate of less than 8.00% and to Merck at a variable rate of less than LIBOR + 1/2%. 
C) Barclay's must be willing to lend to Merck at a variable rate of less than 8.00% and to Shell at a fixed rate of less than LIBOR + 1/2%. 
D) Barclay's must be willing to lend to Merck at a fixed rate of greater than 8.00% and to Shell at a variable rate of greater than LIBOR + 1/2%.

Quizplus · Accepted Answer

For a swap to be beneficial, Barclay's must offer better rates than the existing market rates for both parties. Thus, lending to Merck at a fixed rate of less than 7.50% and to Shell at a variable rate of less than LIBOR + 1/2% would be advantageous.

TABLE 15.2 Use the Information to Answer Following Question(s)