Question

In: Advanced Math

You are a company and just issued a $20m 3-year fixed rate bond. Your investment bank...

You are a company and just issued a $20m 3-year fixed rate bond. Your investment bank suggests that you enter into an interest rate swap to turn this into a floating rate bond. Briefly discuss:

  1. Whether the swap should be one where your company pays fixed and receives floating or the other way around.
  2. Why your company might choose to enter the swap.
  3. Why your company chose to issue a fixed rate bond rather than a floating rate bond.
  4. Another choice that your company could take rather than using the interest rate swap

You should answer this question in a few short paragraphs.

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Expert Solution

Colby Messinger answered 3 years ago
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