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

Multiple Choice

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

-Refer to Table 15.2. Which of the following swap agreements could work for Shell and Merck with Barclay's as the facilitating bank?

A) Merck borrows at a fixed rate of 6% and then enters into "receive fixed, pay floating" interest rate swap with Barclay's. Shell borrows money at a variable rate of LIBOR + 1% and then enters into "receive variable, pay fixed" interest rate swap with Barclay's.
B) Shell borrows at a fixed rate of 6% and then enters into a "receive variable, pay fixed" interest rate swap with Barclay's. Merck borrows money at a variable rate of LIBOR + 1% and then enters into "receive fixed, pay floating" interest rate swap with Barclay's.
C) Shell borrows at a fixed rate of 6% and then enters into "receive fixed, pay floating" interest rate swap with Barclay's. Merck borrows money at a variable rate of LIBOR + 1% and then enters into "receive variable, pay fixed" interest rate swap with Barclay's.
D) None of the above would satisfy both Shell and Merck.