A Firm Can Borrow at Fixed AA Rates for Long-Term

Multiple Choice

A firm can borrow at fixed AA rates for long-term loans.If it swaps its long-term payments so that it receives the fixed AA rate and pays a AA floating rate,what is the rate of interest on its borrowing if the floating rate is r% and the fixed rate is 1%?

A) r + 1%
B) r - 1%
C) r%
D) 1%
E) 2%