A company has identified an exposure to movements in interest rates on its existing debt facilities.The company is considering selling futures contracts to manage that risk and is unsure which of the following contracts may NOT be used for managing interest rate risk exposures.
A) 90-day bank-accepted bills contract
B) S&P/ASX 200 Index
C) Three-year Commonwealth Treasury bond contract
D) Option on a 90-day bank-accepted bill futures contract

Question

Quizplus · Accepted Answer

The S&P/ASX 200 Index contract is not related to interest rate risk, but rather equity market risk. Therefore, it cannot be used to manage interest rate risk exposures. The other contracts listed are all related to interest rates and could be used to manage interest rate risk exposures.

A Company Has Identified an Exposure to Movements in Interest