Explain how a firm can use swaptions

Reference no: EM131323308

A firm has previously issued fixed rate noncallable debt. Because interest rates are perceived to be temporarily high, the firm would like to have the flexibility of calling the debt later when rates are expected to fall and replacing it with floating-rate debt.

Explain how a firm can use swaptions to achieve this desired result. Also, identify and compare an alternative method that can be used to convert fixed-rate debt to floatingrate debt.

Reference no: EM131323308

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