The Financial Manager of a Firm Has a Variable Rate

question 3

Multiple Choice

The financial manager of a firm has a variable rate loan outstanding. If she wishes to protect the firm against an unfavorable increase in interest rates she could:

• A) sell an interest rate futures contract of a similar maturity to the loan.
• B) buy an interest rate futures contract of a similar maturity to the loan.
• C) swap the adjustable rate loan for another of a different maturity.
• D) none of the above

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Definitions:

Brood Parasitism

One egg-laying species benefits by having another raise its offspring.

Competitive Exclusion

A principle stating that two species competing for the same limiting resources cannot coexist at constant population values, if other ecological factors remain constant.

Woodpeckers

A family of birds known for their strong beaks and ability to peck at wood to find insects, create nesting sites, or communicate.

Brood Parasites

Organisms that rely on others to raise their young, often laying their eggs in the nests of unrelated species, which then unknowingly rear the parasitic offspring.