Suppose that a corporation is considering using an interest rate swap in conjunction with the offering of

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Suppose that a corporation is considering using an interest rate swap in conjunction with the offering of a floating-rate bond issue. That is, the corporation wants to use the swap to change the funding arrangement from a floating rate to a fixed rate.

a. Would the corporation enter into a swap in which it pays or receives a fixed rate?

b. Suppose that the corporation does not plan to issue the bond for one year. What type of swap can the firm's management enter into in order to set the terms of the swap today?

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Foundations Of Financial Markets And Institutions

ISBN: 9780136135319

4th Edition

Authors: Frank J Fabozzi, Franco G Modigliani, Frank J Jones

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