Explain how to construct the swap that tioga wants

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Reference no: EM133328256

Case: Canawacta Tioga is the CFO for Wyalusing Corporation, a multinational manufacturing company based in Canada. One year ago, Wyalusing issued fixed-rate coupon bonds in Canada. Tioga now expects Canadian interest rates to fall and remain low for three years. During this three-year period, Tioga wants to use a par interest rate swap to effectively convert the fixed-rate bond coupon payments into floating-rate payments.

Question 1: (a): Explain how to construct the swap that Tioga wants to use with regard to the swap

Question 2: (b): A US bond portfolio manager wants to hedge a long position in a 10-year Treasury bond against a potential rise in domestic interest rates. He would most likely:

A. sell fixed-income (bond) futures.

B. enter a receive-fixed 10-year interest rate swap.

C. sell a strip of 90-day Eurodollar futures contracts. Explain?

Reference no: EM133328256

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