Individual can hedge against loss from decline interest rate

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Reference no: EM131932938

1. If a lender agrees to lend a firm $ 1,000,000 after six months at the going rate, that individual can hedge against the loss from a decline interest rates by

a) buying a financial futures contract

b) selling a financial futures contract

c) taking a short position

d) making the loan now

2. A bond has coupon rate 5%, face value of $1000, yield to maturity of 7%, and matures in 6 years. Which of the following statements is true?

a. the bond will increase in value over time

b. the bonds capital gains yield is negative, but will increase over time

c. the bonds current yield will increase over time

d. the bonds capital gains yield is positive, but will decrease over time

e. none of the above

Reference no: EM131932938

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