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Trooper limited is an American company which needs to raise US$1,000,000 for its expansion inside US. The options are: a. A 2-year floating rate note
Trooper limited is an American company which needs to raise US$1,000,000 for its expansion inside US. The options are:
a. A 2-year floating rate note at 1% above the 1-year US Dollar rate. Interest is paid once a year.
b. A 2-year bond sold in the US at a fixed interest rate of 5%.
Currently, the 1-year US dollar LIBOR rate is 3.50% and is expected to rise to 4.5% next year. Which security should the treasurer choose if borrowing costs are same for both securities?
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