A firm with a floating-rate bond investment portfolio could manage its interest

Question

A firm with a floating-rate bond investment portfolio could manage its interest rate risk by: a. b. c. d. Entering into a pay-fixed-receive-floating interest rate swap Entering into a pay-floating-receive-fixed interest rate swap Constructing an interest rate collar by buying a cap and selling a floor None of the above A firm with fixed-rate debt that expects interest rates to fall may engage in a swap agreementto a. Pay fixed-rate interest and receive floating rate interest. b. Pay floating-rate interest and receive fixed-rate interest. c. Pay fixed-rate interest and receive fixed-rate interest d. Pay floating-rate interest and receive floating-rate interest.

Explanation / Answer

A firm with fixed rate debt that expect interest rate to fall may engage in Swap agreement to pay floating rate interest and receive fixed rate interest.

Option (B) is correct answer.

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