If a Futures Contract Is Used to Hedge a Debt

question 21

True/False

If a futures contract is used to hedge a debt sale, and interest rates go down causing debt security prices to rise, the potential benefit of being able to issue debt at that lower interest rate (higher price) will be offset by a loss on the futures position.

---

Definitions:

Independent Variable

The variable in an experiment that is manipulated or changed by the researcher to observe its effect on the dependent variable.

Mixed Factorial Design

An experimental design involving both within-subjects and between-subjects variables.

Cheating

The act of acting dishonestly or unfairly in order to gain an advantage, particularly in the context of academic, sporting, or relational activities.

Visualization

The representation of objects, data, or ideas in a visual format, enhancing understanding or analysis.