Question 1 [3 points] Pequod Inc., a retail company in the U.S., has two outstanding debts: . A floating rate bank loan repayable on Jun 30, 2022. Interest rate is reset on Jan 1 and Jul 1 each year at 6-month LIBOR + 2% p.a. . A 7% fixed rate bond with a face value of $160 million and a remaining maturity of 8 years. Pequod had total interest expense of $15.4 million for the 12-month period ended December 31, 2018. Pequod's current fixed rate financing cost (for maturities of 8 to 10 years) = 2.8% over US Treasuries. (2.8% is the credit spread). Current US Treasury rates are: 2.5% for 8-year, and 2.7% for 10-year. 6-month LIBOR rates (p.a.) for the past periods: Jul 1, 2017 = 1.0% Jan 1, 2018 = 1.4% Jul 1, 2018 = 1.6% Jan 1, 2019 = 1.9% Page 1 of 7