The U.S.Government debt managers use interest-rate swaps primarily because:
A)The U.S.Government runs large deficits.
B)The debt managers prefer to issue long-term bonds because they are cheaper to issue but prefer short-term variable rate obligations to match revenues.
C)The debt managers find it difficult to borrow from traditional debt markets.
D)They are required by law to keep the cost of borrowing to a minimum.

Question

Quizplus · Accepted Answer

The debt managers prefer to issue long-term bonds because they are cheaper to issue but prefer short-term variable rate obligations to match revenues. Interest-rate swaps allow them to convert the long-term fixed rates into short-term variable rates, thereby achieving the desired balance. The other options are not accurate reasons for using interest-rate swaps.

The USGovernment Debt Managers Use Interest-Rate Swaps Primarily Because