Interest Rate Swap Strategy for Risk Management

ABC Corporation is considering entering into an interest rate swap to manage its exposure to floating interest rates associated with its current debt structure. The company estimates that its floating-rate debt will amount to $10 million, and it is concerned about potential increases in interest rates affecting its cash flows. The swap would involve ABC exchanging its floating interest payments for fixed interest payments with a counterpart.

Discuss how ABC Corporation can utilize a fixed-for-floating interest rate swap to hedge its interest rate risk. Include information on the mechanics of the swap, the potential benefits and risks associated with this strategy, and the impact on ABC's financial statements.