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Company X issues variable-rate debt but wishes to fix its interest rates because it believes the variable rate may increase. Company Y has a fixed-rate
Company X issues variable-rate debt but wishes to fix its interest rates because it believes the variable rate may increase. Company Y has a fixed-rate bond but is looking for a variable-rate interest because it assumes the interest rates may decrease. The two companies agree to exchange cash flows. Such an arrangement is called:
a) a futures contract | ||
b) | a forward contract | |
c) | a swap | |
d) | an option |
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