1. Walmart would like to borrow floating USD for 5 years. It could issue CP every three months. Does this deliver a floating rate? Why? What are the risks of CP? Alternatively, Walmart could issue a five-year FRN at L+0.75%. As a third alternative, it could issue in EUR fixed at 0.5%. Dealers quote five-year EUR swap rate at -0.35 bid / -0.32 ask and the USD swap rate at 1.0% bid/ 1.02% ask. What sort of financing do you recommend that Walmart issueCP, USD FRN or EUR fixed? Explain in detail. What is Walmart's cost of funds?

2. "IFCa sister organization of the World Bank and member of the World Bank Groupis the largest global development institution focused exclusively on the private sector in developing countries." It borrows $285 billion to finance its operations. It would like to borrow $1 billion in floating USD for five years. Let's ignore the switch from Libor to SOFR. It is considering two options presented by its investment bankers.

I. EUR floating rate note. Rate: Euribor + 10 bps II. USD fixed. Rate: 1.25%

Here are the five-year IRS markets:

EUR: -0.40 (bid) / - 0.38% (ask) USD: 1.10% (bid) / 1.13% (ask)

1) What sort of swap would the IFC require to convert the EUR bond into floating USD? Describe it in as much detail as you can. What cost of funds does it obtain?

2) What sort of swap would the IFC require to convert the fixed USD bond into floating USD? What cost of funds does it obtain?

3) Which of these two strategies is better? Does your answer depend on when the Fed renormalizes (i.e., starts hiking) its policy rate?