3. A US automobile company rated BB with global operations would like to borrow USD funds on a fixed-rate basis for 10 years. They can issue a note with a fixed coupon of 3.75% (semi-annual coupon) or a floating-rate note with a coupon of three-month Libor + 2.50% (quarterly coupon). Both notes would be issued at par. Ten-year USD interest rate swaps are priced with a bid rate of 1.20% (receive 1.20% and pay three- month Libor quarterly) and an ask rate of 1.23% (pay 1.23% and receive three-month Libor quarterly). The swap's floating-rate and the floating-rate note will switch to SOFR when Libor is not quoted. Three-month Libor is currently 0.25%. Determine the effective annual yield of the fixed-rate note and the floating-rate note when swapped from a floating-rate basis to a fixed-rate. What is the preferable method of borrowing fixed-rate funds? 4. Estimate the effective duration and convexity for a five-year, non-callable note previously issued by an automobile company with a coupon of 7.25% (payable on a semiannual basis) priced @ 3.50%. Shock annual yields +/- 1%. Use any par value desired 3. A US automobile company rated BB with global operations would like to borrow USD funds on a fixed-rate basis for 10 years. They can issue a note with a fixed coupon of 3.75% (semi-annual coupon) or a floating-rate note with a coupon of three-month Libor + 2.50% (quarterly coupon). Both notes would be issued at par. Ten-year USD interest rate swaps are priced with a bid rate of 1.20% (receive 1.20% and pay three- month Libor quarterly) and an ask rate of 1.23% (pay 1.23% and receive three-month Libor quarterly). The swap's floating-rate and the floating-rate note will switch to SOFR when Libor is not quoted. Three-month Libor is currently 0.25%. Determine the effective annual yield of the fixed-rate note and the floating-rate note when swapped from a floating-rate basis to a fixed-rate. What is the preferable method of borrowing fixed-rate funds? 4. Estimate the effective duration and convexity for a five-year, non-callable note previously issued by an automobile company with a coupon of 7.25% (payable on a semiannual basis) priced @ 3.50%. Shock annual yields +/- 1%. Use any par value desired