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Suppose that a life insurance company has issued a three-year GIC with a fixed-rate of 10%. Under what circumstances might

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Suppose that a life insurance company has issued a three-year GIC with a fixed-rate of 10%. Under what circumstances might it be feasible for the life insurance company to invest the funds in a floating-rate security and enter into a three-year interest-rate swap in which it pays a floating rate and receives a fixed-rate?

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If the life insurance can enter a swap that guarantees a satisfactory spread above the 10 it is committed to pay then it would not only be feasible but desirable to enter into the swap More details ar…View the full answer


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Bond Markets Analysis and Strategies

Bond Markets Analysis and Strategies

ISBN: 978-0133796773

9th edition

Authors: Frank J.Fabozzi

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Question Posted: August 22, 2015 07:52:18
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