A company who intends to borrow in 3 months can hedge and lock in the cost of borrowing by:
A) buying an interest rate futures contract.
B) selling an interest rate futures contract.
C) selling a FRA.
D) buying an interest rate swap.

Question

Quizplus · Accepted Answer

Selling an interest rate futures contract allows the company to lock in the current interest rate, hedging against the risk of rising rates when they borrow in 3 months.

A Company Who Intends to Borrow in 3 Months Can