Twin Oaks Brewery (TOB) needs to borrow $20 million immediately. It can borrow for three years at
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Twin Oaks Brewery (TOB) needs to borrow $20 million immediately. It can borrow for three years at a fixed rate of 7.5% or at a floating rate of LIBOR + 40 basis points. Plain vanilla fixed-for-floating three-year swaps are priced at 7.3% fixed, in exchange for floating LIBOR. If TOB believes that interest rates are about to rise sharply, what should it do? If TOB believes that interest rates are about to decline sharply, what should it do?
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
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