a)A U.K. company needs to raise AUD1,000,000. It plans to raise this money by issuing pound-denominated bonds and using a currency swap to convert the pounds to Australian dollars (AUD). The company expects interest rates in both the U.K. and Australia to rise.

i.Should the swap be structured with interest paid at a fixed or a floating rate? Justify your answer clearly.

ii.Should the swap be structured with interest received at a fixed or a floating rate? Justify your answer clearly.