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A company has some 7% coupon bonds in issue and wishes to change its interest rate profile.

A company has some 7% coupon bonds in issue and wishes to change its interest rate profile.  

It has decided to do this by entering into a plain coupon interest rate swap with it's bank.

 

The bank has quoted a swap rate of:      6.0% - 6.5% fixed against LIBOR.

 

What will the company's new interest rate profile be?

A.

VARIABLE at LIBOR

B.

VARIABLE at LIBOR + 0.5%

C.

VARIABLE at LIBOR + 1.0%

D.

FIXED at 6.5%

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