A Type of Financial Derivative That Would Allow a Firm

question 22

Multiple Choice

A type of financial derivative that would allow a firm to hedge against changes in interest rates over a 5-year period is a(n) ____.

• A) interest rate futures contract
• B) commodity soup
• C) interest rate swap
• D) interest rate put option

---

Definitions:

Unlimited Life

Refers to corporations or legal entities that continue to exist indefinitely until dissolution, unlike natural persons who have a finite lifespan.

Double Taxation

The imposition of taxes on the same income, asset, or financial transaction at two different levels of government.

Accounting

A systematic process of recording, summarizing, and reporting the financial transactions of a business.

Cash Flow

The net amount of cash and cash-equivalents being transferred in and out of a business, crucial for its liquidity, solvency, and financial flexibility.