When a Financial Manager anticipates changes in interest rates and wants to chan

Question

When a Financial Manager anticipates changes in interest rates and wants to change the nature of his/her borrowings, they can enter into an interest rate swap. The manager should remember: a. Take the pay-fixed side of a swap when interest rates are anticipated to move up and the receive-floating side when anticipated to move down. b. Take the pay-floating side of a swap when interest rates are anticipated to move up and the pay-fixed side when rates are anticipated to move down. c. Take the pay-floating side of a swap when interest rates are anticipated to move up and the pay-floating side when rates are anticipated to move down. d. Take the pay-floating side of a swap when interest rates are anticipated to move down and the pay-fixed side when anticipated to move up. e. None of the above

Explanation / Answer

Option.C)Take the pay-floating side of a swap when interest rates are anticipated to move up and the pay-floating side when rates are anticipated to move down.
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