If You Funded Your Fixed-Income Investment Portfolio with Short-Term Deposits

question 500

Multiple Choice

If you funded your fixed-income investment portfolio with short-term deposits, how would you hedge your interest rate exposure with interest rate swaps?

• A) Pay fixed and receive floating through swaps for the term of the portfolio
• B) Pay floating and receive fixed through swaps for the term of the portfolio
• C) You cannot: the maturity of the swaps would be longer than that of the deposits
• D) You should not: there would be too much basis risk

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Definitions:

Ecclesiastical Appointments

Ecclesiastical appointments refer to the process by which individuals are selected and assigned roles within the church hierarchy.

Samuel de Champlain

Samuel de Champlain was a French explorer and cartographer who played a major role in establishing the foundations of the French colony in the New World, particularly in Quebec.

Quebec

A province in eastern Canada, known for its French heritage, language, and culture, making it a unique part of the predominantly English-speaking country.

Treaty of Cateau-Cambresis

A series of agreements signed in 1559, ending the conflict between the French Valois and Spanish Habsburgs.