A Banker Who Is Paying a Fixed 6 Percent Rate

question 7

Multiple Choice

A banker who is paying a fixed 6 percent rate on CDs for the next two years and is afraid interest rates may go down on new loans,may hedge this exposure with interest rate swaps by

• A)Swapping a fixed rate for a variable rate
• B)Swapping a variable rate for a fixed rate
• C)Swapping short-term exposure for long-term exposure
• D)Swapping long-term exposure for short-term exposure

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Definitions:

Recurring Requirements

Ongoing or periodic needs that must be met regularly, such as monthly material orders or annual subscriptions.

Requisition

A formal or official request made within an organization, typically for goods or services.

External Suppliers

Companies or individuals who provide products or services to another company but are not part of that company.

Authorize Buyers

The process of giving approval or permission to purchasers to conduct transactions, often within specific guidelines or limits.