Good Company prefers variable to fixed rate debt. Bad Company prefers fixed to variable rate debt. Assume that Good and Bad Companies could issue bonds as follows:

Fixed Rate Bond Variable Rate Bond
Good Company 10% LIBOR + 1%
Bad Company 12% LIBOR + 1.5%

Given this information:

a. an interest rate swap will probably not be advantageous to Good Company because it can issue both fixed and variable debt at more attractive rates than Bad Company.

b. an interest rate swap attractive to both parties could result if Good Company agreed to provide Bad Company with variable rate payments at LIBOR + 1% in exchange for fixed rate payments of 10.5%.

c. an interest rate swap attractive to both parties could result if Bad Company agreed to provide Good Company with variable rate payments at LIBOR + 1% in exchange for fixed rate payments of 10.5%.

d. none of the above

In the fall, jay thompson decided to live in a university dormitory. he signed a dorm contract under which he was obligated to pay the room rent for the full college year. one clause stated that if he moved out during the year, he could sell his dorm contract to another student who would move into the dormitory as his replacement. the dorm cost was $5000 for the two semesters, which jay had already paid a month after he moved into the dorm, he decided he would prefer to live in an apartment. that week, after some searching for a replacement to fulfill his dorm contract, jay had two offers. one student offered to move in immediately and to pay jay $300 per month for the eight remaining months of the school year. a second student offered to move in the second semester and pay $2500 to jay. jay estimates his food cost per month is $500 if he lives in the dorm and $450 if he lives in an apartment with three other students. his share of the apartment rent and utilities will be $404 per month. assume each semester is 4.5 months long. disregard the small differences in the timing of the disbursements or receipts. what is the cost of the cheapest alternative?