Your Firm Is Faced with Paying a Variable Rate Debt

question 23

Essay

Your firm is faced with paying a variable rate debt obligation with the expectation that interest rates are likely to go up. Identify two strategies using interest rate futures and interest rate swaps that could reduce the risk to the firm.

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Definitions:

Generative

Pertaining to the capacity of something, such as a grammar or a cognitive process, to produce or create a potentially infinite number of entities or elements, like sentences or ideas.

Phonetic

Relating to the sounds of speech and their production, transmission, and reception.

Symbolic

Pertaining to symbols or the use of symbols in communication, representation, or expression of ideas and concepts.

Language

A system of communicated symbols, sounds, or gestures used by people to express thoughts and feelings.