Part a: Define Interest Rate Swap. If you expect interest rate to increase, what kind of interest rate swap you will buy?

Part b: How can swaps be used to reduce the risks associated with debt contracts?

Part c: Which of the following strategies is (are) appropriate?

I. If a borrower has a fixed rate debt and is expecting interest rates to rise, then the borrower should not enter into a swap.

II. If an investor has floating rate assets and is expecting interest rates to rise, then the investor should enter into a swap in order too receive fixed and pay float.

III. If a borrower has floating rate debt and is expecting interest rates to rise, then the borrower should enter into a swap in order to receive float and pay fixed.

IV. If an investor has fixed income assets and is expecting interest rates to drop, then the investor should enter into a swap in order to receive float and pay fixed.

Provide clear explanation on your above choice(s)?