Firm a Is Paying $750,000 in Interest Payments a Year

Multiple Choice

Firm A is paying $750,000 in interest payments a year while Firm B is paying LIBOR plus 75 basis points on $10,000,000 loans.The current LIBOR rate is 6.5%.Firm A and B have agreed to swap interest payments.What is the net payment this year?

A) Firm A pays $750,000 to Firm B
B) Firm B pays $725,000 to Firm A
C) Firm B pays $25,000 to Firm A
D) Firm A pays $25,000 to Firm B
E) None of the above.