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A firm agrees to accept annual payments on a $1,000,000 loan with a fixed interest rate of 8% in exchange for making the annual payments on a loan with floating rate payments based on LIBOR. Payments are interest only with principal due in 10 years. If LIBOR falls to 7%, the firm's net cash flow will be:

a. $70,000.

b. ($10,000).

c. $10,000.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M942318

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