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Unlike the Situation with Exchange Rate Risk, There Is No

Question 21
True False

Unlike the situation with exchange rate risk, there is no uncertainty on the part of management for shareholder preferences regarding interest rate risk. Shareholders prefer that managers hedge interest rate risk rather than having shareholders diversify away such risk through portfolio diversification.

Related questions
Q 22
An interbank-traded contract to buy or sell interest rate payments on a notional principal is called a/an: A) forward rate agreement. B) interest rate future. C) interest rate swap. D) none of the above
Q 23
A/an ________ is a contract to lock in today interest rates over a given period of time. A) forward rate agreement B) interest rate future C) interest rate swap D) none of the above
Q 24
The financial manager of a firm has a variable rate loan outstanding. If she wishes to protect the firm against an unfavorable increase in interest rates she could: A) sell an interest rate futures contract of a similar maturity to the loan. B) buy an interest rate futures contract of a similar maturity to the loan. C) swap the adjustable rate loan for another of a different maturity. D) none of the above
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