If You Think That Interest Rates Are Likely to Rise

question 48

True/False

If you think that interest rates are likely to rise substantially over the next several years,you might sell a T-bond futures contract or buy an interest rate cap to take advantage of your expectations.

---

Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed by the government on income or property.

After-Tax Discount Rate

The after-tax discount rate is the rate used to discount future cash flows back to their present value, accounting for taxes, and is crucial in evaluating the after-tax net present value of future cash flows.

Capital Budgeting

The evaluation of investment projects in terms of their potential to increase shareholder value through strategic long-term asset allocation.

Incremental Sales

Incremental sales refer to the additional sales revenue gained from a particular sales activity or decision, beyond what would have been achieved otherwise.