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A company’s investments earn LIBOR – 0.5%. suppose 5-year fixed interest rate on a swap quote...

A company’s investments earn LIBOR – 0.5%. suppose 5-year fixed interest rate on a swap quote is 6.47%. Explain how the company can convert its investments to have a maturity of 5 years earning fixed interest rate.

a. By entering into a 5-year swap where it receives 6.47% and pays LIBOR the company earns 5.97% for five years

b. By entering into a 5-year swap where it pays 6.47% and receives LIBOR, the company earns 5.97% for five years

c. By entering into a 5-year swap where it receives LIBOR-0.5% and pays fixed, the company earns 5.97% for five years

d. None of the above

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