Concept Checkers on page 248 of book 4. I’m not understanding why the answer is choice C below. Why is LIBOR positive when the firm will be paying LIBOR?
- A firm issues fixed-rate bonds and simultaneously becomes a fixed-rate receiver counterparty in a corresponding plain vanilla interest rate swap. Which of the following best describes the subsequent, effective periodic interest payments of the firm? (SFR = swap fixed rate) A. SFR- [LIBOR- (fixed rate on debt)]. B. LIBOR- [(fixed rate on debt) - SFR]. C. LIBOR- [SFR- (fixed rate on debt)].