Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 7%. The firm then enters into an interest rate swap where it pays LIBOR and receives a fixed 6% on notional...

Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 7%. The firm then enters into an interest rate swap where it pays LIBOR and receives a fixed 6% on notional principal of $100 million. What is the firm’s effective interest rate on its borrowing?