The Advantage of Hedging an Interest Rate Exposure with Interest

question 46

Multiple Choice

The advantage of hedging an interest rate exposure with interest rate options is:

• A)a lower forward rate is 'locked-in'
• B)a higher forward rate is 'locked-in'
• C)they have a lower cost than futures
• D)the benefit of a favourable rate movement is not forgone.
• E)None of these.

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Definitions:

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Brain Area

A region within the brain that serves a specific function or group of functions.

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PET Scan

Positron Emission Tomography, a type of imaging test that allows doctors to check for diseases in the body by injecting a small amount of a radioactive chemical to see how organs and tissues are functioning.