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Your firm has just borrowed $10 million for 10 years by issuing bonds that pay the one-year Treasury bill rate plus 2%. The firm has
Your firm has just borrowed $10 million for 10 years by issuing bonds that pay the one-year Treasury bill rate plus 2%. The firm has used these funds to make a long-term loan for 10 years at 7%. What risk does your firm face and how could it hedge this risk with an interest rate swap? Give an example of the terms of a swap that the firm might accept. Acceptable terms should guarantee a profit
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