Emergency calls only 83% 01:46 0 Emergency Calls Only 43% D 19:10 & FD MOCK TEST An... | Chegg.com chegg.com Q3 SNS Group recently issued a bond with a face value of $100 million. This bond is redeemable in three years with interest payment based on 6-month LIBOR. SNS Group is concerned higher cost of borrowing as the treasury of the company foresee a potential contractionary monetary policy undertaken by central bank to cool off economic growth. SNS Corp. is considering to lock-in the interest payment using a swap agreement to avoid higher cost of debt. A swap dealder, U&D Bank has offered SNS Group an interest rate swap with swap coupon shown in table below. U&D Bank's indicative swap pricing schedule Maturity (year) 3 4 5 U&D Receives Fixed 3.35% 3.45% 3.55% U&D Pays Fixed 3.14% 3.24% 3.34% (a) Based on above information, suggest an appropriate hedging strategy for SNS Group using a swap contract. (b) Justify your answer in part (a) with an example to demonstrate that SNS Group's cost of debt remains constant regardless of the change in interest rate after it has undertaken the swap. Emergency calls only 83% 01:46 0 Emergency Calls Only 43% D 19:10 & FD MOCK TEST An... | Chegg.com chegg.com Q3 SNS Group recently issued a bond with a face value of $100 million. This bond is redeemable in three years with interest payment based on 6-month LIBOR. SNS Group is concerned higher cost of borrowing as the treasury of the company foresee a potential contractionary monetary policy undertaken by central bank to cool off economic growth. SNS Corp. is considering to lock-in the interest payment using a swap agreement to avoid higher cost of debt. A swap dealder, U&D Bank has offered SNS Group an interest rate swap with swap coupon shown in table below. U&D Bank's indicative swap pricing schedule Maturity (year) 3 4 5 U&D Receives Fixed 3.35% 3.45% 3.55% U&D Pays Fixed 3.14% 3.24% 3.34% (a) Based on above information, suggest an appropriate hedging strategy for SNS Group using a swap contract. (b) Justify your answer in part (a) with an example to demonstrate that SNS Group's cost of debt remains constant regardless of the change in interest rate after it has undertaken the swap