There are two floating rate bonds you can buy. One is a Bull floater and the other is a Bear floater. The terms and rates on the bond are:

 

                         Term in years           annual coupon rate on bond

Bull floater                    5                         10% - Libor

Bear floater                   5                         2 x Libor - 4%

 

The 5 year treasury rate is 4.50% and the fixed rate for a 5 year swap is 0.85% over treasuries. 

1. If your client does not want to have exposure to Libor but is interested in one of these investments, which one would you recommend and how would you structure it to achieve a fixed return?
2. At what 5 year treasury rate would you be indifferent between the two investments?