If the bank wishes to set up a swap to totally hedge the interest rate risk, the bank should A. pay a variable rate of interest and receive a fixed rate of interest. B. pay a fixed rate of interest and receive a variable rate of interest. C. pay a variable rate of interest and receive a variable rate of interest. D. pay a fixed rate of interest and receive a fixed rate of interest.
If the bank wishes to set up a swap to totally hedge the interest rate risk, the bank should A. pay a variable rate of interest and receive a fixed rate of interest. B. pay a fixed rate of interest and receive a variable rate of interest. C. pay a variable rate of interest and receive a variable rate of interest. D. pay a fixed rate of interest and receive a fixed rate of interest.
Chapter18: Long-term Debt Financing
Section: Chapter Questions
Problem 3BIC
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