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FI351
Interest Rate Risk
Question | Answer |
---|---|
What is repricing risk? | The risk of changes in interest rates charged (earned) at the time of a financial contract's rate is reset |
What are two considerations for a yield curve? | Maturity of borrowing & Maturity rate of interest exposure |
What's a fixed rate? | Fixed rate guarantees a certain rate |
What is a floating rate? | Floating rates are currently lower |
What are ways to manage interest rates? | – Refinancing – Interest rate futures – Interest rate swaps |
Describe refinancing | At one time was the only alternative • Expensive, long lead time, hard to implement |