medium · Private Credit documentation-covenants-terms
A borrower has a 100M loan at SOFR + 500 bps. To hedge interest rate risk, the borrower enters into a 3-year interest rate swap where they pay 4.00% fixed and receive SOFR.
If SOFR rises to 6.00%, what is the borrower's effective interest rate?
- 4.00%
- 9.00%
- 11.00%
- 10.00%
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