When an Interest-Rate Swap Is Used to Hedge a Financial

question 22

Multiple Choice

When an interest-rate swap is used to hedge a financial risk on a company's balance sheet, thecompany will have

• A) a short-term liability and a short-term asset with fixed values even if interest rates vary
• B) a short-term liability and a long-term asset with offsetting changes in value when interest rates vary
• C) a long-term liability and a short-term asset with fixed values even if interest rates vary
• D) a long-term liability and a long-term asset with offsetting changes in value when interest rates vary

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Definitions:

Analysis Method

A systematic approach used in various fields to examine data or processes in order to draw conclusions or make decisions.