Floating-Rate Bonds What factors should be considered by a U.S. firm that plans to issue a floating-rate bond denominated in a foreign currency? Is the risk of issuing a floating-rate bond higher or lower than the risk of issuing a fixed-rate bond? Explain. How would an investing firm differ from a borrowing firm in the features (i.e., interest rate and currency’s future exchange rates) it would prefer a floating-rate foreign currency-denominated bond to exhibit?

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 18, Problem 1QA
Textbook Problem

Floating-Rate Bonds

  1. What factors should be considered by a U.S. firm that plans to issue a floating-rate bond denominated in a foreign currency?
  2. Is the risk of issuing a floating-rate bond higher or lower than the risk of issuing a fixed-rate bond? Explain.
  3. How would an investing firm differ from a borrowing firm in the features (i.e., interest rate and currency’s future exchange rates) it would prefer a floating-rate foreign currency-denominated bond to exhibit?

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