Question: 0 Question 8 10 pts Microsoft issued 5% fixed-rate bonds whereas Netflix issued debt securities paying the T-Bill rate + 1%. The two companies would

0 Question 8 10 pts Microsoft issued 5% fixed-rate bonds whereas Netflix issued debt securities paying the T-Bill rate + 1%. The two companies would like to offset their risks via a swap agreement with Bank of America. a) What is the risk faced by Microsoft that it wants to mitigate with the swap? Explain. [2 marks] b) What is the risk faced by Netflix? Explain. [2 marks] c) How can Bank of America structure a swap with Microsoft and Netflix so that the companies hedge their risks and the bank achieves a profit of 0.25% of the notional involved? [6 marks]

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