What will the company’s new interest rate profile be?

A company has some 7% coupon bonds in issue and wishes to change its interest rate profile.

It has decided to do this by entering into a plain coupon interest rate swap with it’s bank.

The bank has quoted a swap rate of: 6.0% – 6.5% fixed against LIBOR.

What will the company’s new interest rate profile be?
A . VARIABLE at LIBOR
B . VARIABLE at LIBOR + 0.5%
C . VARIABLE at LIBOR + 1.0%
D . FIXED at 6.5%

View Answer

Answer: C