Derivatives Q20

20A corporation has issued 10-year, floating-rate bonds. The treasurer realizes that the interest rates are going to rise and enters into an agreement to receive semi-annual payments based on the 6-month LIBOR and to make semi-annual payments at a fixed rate. This agreement is best described as a(n):

Option : C
Explanation : It is a swap because two parties agree to exchange cash flows in the future. Section

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