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Question 4 (a) In 2014, Apple Inc. issued $2.5 billion 4% 10-year bond. How should Apple hedge its interest rate risk via an Interest Rate

Question 4

(a) In 2014, Apple Inc. issued $2.5 billion 4% 10-year bond. How should Apple hedge its interest rate risk via an Interest Rate Swap?

(b) Assuming Apple has a bond portfolio that has risk characteristic same as the bond in part (a) above. Apart from using Interest Rate Swap to manage its risk, explain how Apple could manage this interest rate risk by Duration management.

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