Company X,a Low-Rated Firm,desires a Fixed-Rate,long-Term Loan

Multiple Choice

Company X,a low-rated firm,desires a fixed-rate,long-term loan.X presently has access to floating interest rate funds at a margin of 1.25% over LIBOR.Its direct borrowing cost is 11% in the fixed-rate bond market.In contrast,company Y,which prefers a floating-rate loan,has access to fixed-rate funds in the Eurodollar bond market at 9% and floating-rate funds at LIBOR + 1/4%.Suppose they split the cost savings.
-How much would X pay for its fixed-rate funds?

A) 9.5%
B) 10.0%
C) 10.5%
D) 10.75%