Generally,which of the following is FALSE regarding interest rate risk management techniques?
A)Borrowers can protect themselves from upward movements in interest rates by using interest rate caps
B)Borrowers can protect themselves from upward movements in interest rates by using interest rate futures contracts
C)Borrowers can benefit from downward movements in interest rates by using interest rate caps
D)Borrowers can benefit from downward movements in interest rates by using interest rate futures contracts

Question

Quizplus · Accepted Answer

Interest rate futures contracts are typically used to hedge against interest rate risk, not to benefit from downward movements in interest rates. They lock in a rate, which can protect against rising rates but not necessarily allow borrowers to benefit from falling rates.

Generally,which of the Following Is FALSE Regarding Interest Rate Risk