1.Explain how someone currently involved in an interest rate swap might logically use a swaption along with it.
2.Two firms have the borrowing rates shown below. As the CFO of firm AAA, you always consider an interest rate swap before borrowing money. Explain how, if at all, a swap with BBB be advantageous to you if
a.you wanted to borrow at a fixed rate.
b.you wanted to borrow at a floating rate.
3. In Problem 3, explain firm AAA’s comparative and absolute advantages in the fixed and floating rate markets relative to firm BBB