You believe interest rates will soon fall.
a. Would you rather own a three-year, 6 percent coupon, fixed-rate bond or an equivalent-risk, three-year, floating-rate bond currently paying 6 percent interest?
b. Would your answer to (a) change if you were contemplating issuing a bond rather than owning one? If so, how?
c. Would your answer to (a) change if, as an investor, you believed interest rates would soon rise? If so, why?
d. In the current market scenario with low interest rate if you are planning to buy a new house in next 60 days would you prefer a fixed rate mortgage or variable rate mortgage? Explain?