For a Floating Rate Borrower Wishing to Hedge an Exposure

question 80

True/False

For a floating rate borrower wishing to hedge an exposure to higher than expected spot rates, interest rate swaps lock in varying forward rates in the same way as a strip of FRAs or a strip of BAB futures.

---

Definitions:

Stock-Outs

Stock-outs occur when an item is no longer available for sale, typically because inventory levels have been depleted.

Periodic Inventory System

A method of inventory valuation where inventory counts and cost of goods sold calculations are made periodically at the end of a reporting period, instead of after each sale.

Cost Flow Assumptions

Accounting principles that dictate how the cost of goods sold and ending inventory values are calculated, such as FIFO (First-In, First-Out) or LIFO (Last-In, First-Out).

LIFO

"Last In, First Out" - an inventory valuation method where the most recently produced or purchased items are recorded as sold first.