Question
If a corporation is concerned that the 3 month average SOFR portion of their floating rate debt might rise above 4%, which transaction would they
If a corporation is concerned that the 3 month average SOFR portion of their floating rate debt might rise above 4%, which transaction would they want to execute (all transactions would be for the term of the debt and the same notional of the debt):
Group of answer choices
purchase a floor struck at 4% based on 3 average month SOFR
enter into a receive 4% fixed swap and pay 3 month LIBOR
sell a cap struck at 4% and purchase a floor struck at 4% for a total zero upfront cost (Cap and Floor based on 3 month SOFR)
enter into a pay 4% fixed vanilla swap and receive 3 month average SOFR
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