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Category > Business & Finance Posted 03 Aug 2017 My Price 9.00

FE Company wishes to raise $1,000,000

FE Company wishes to raise $1,000,000 with debt financing. The treasurer of FE Company considers two possible instruments:
i. A 2-year floating-rate note at 1% above the 1-year dollar LIBOR rate on which interest is paid once a year.
ii. A 2-year bond with an interest rate of 5% 
Currently, the dollar LIBOR is 1.50%.
a. Is it obvious which security the Treasurer should pick?
b. Suppose the Treasurer believes that the 1-year LIBOR rate 1 year from now will rise to 4.50%. Which security has the lowest expected AIC if borrowing fees are similar for the two instruments?

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Status NEW Posted 03 Aug 2017 04:08 PM My Price 9.00

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