Question
Please use the following to answer questions 7,8,9, and 10. Risk Adverse Company issued 5 Year Bonds worth $1,000,000 on January 1, 2010 with interest
Please use the following to answer questions 7,8,9, and 10. Risk Adverse Company issued 5 Year Bonds worth $1,000,000 on January 1, 2010 with interest payable each year. The bonds were set up as floating rate debt with an interest payable each year. The bonds were set up as floating rate debt with an interest rate set to LIBOR plus 5%. On the same date, Risk Adverse entered into a swap agree with Speculative Bank because they wanted fixed rate interest payments to hedge their interest cash flow of the debt instrument. The LIBOR rate was 4% on January 1 ,2020 and the fixed interest rate on the swap was set to 9% on this date. 7. Risk Adverse has entered into a: A. Fair Value Hedge B. Speculative Investment C. Cash Flow Hege D. Interest Rate Hedge
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