Your ﬁrm currently has all ﬁxed-rate debt. You would like to convert part of this to ﬂoating-rate debt. You should consider a(n):

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To convert fixed-rate debt to floating-rate debt, the best choice is an interest rate swap, which allows the firm to exchange its fixed-rate debt for floating-rate debt. Option A, option on floating-rate bonds, does not provide a direct way to convert existing debt. Option B, a forward contract on Treasury bills, is not relevant for converting debt. Option D, a currency swap, involves exchanging two different currencies and does not address the issue of interest rates. Option E, an interest rate call option, does not provide a direct way to convert existing debt.

Your ﬁRm Currently Has All ﬁXed-Rate Debt