Exam CIMAPRA19-P03-1 Topic 4 Question 184 Discussion

A. An interest rate swap is an external hedging technique.

B. Some companies use interest rate swaps to deliberately increase their risks because they believe that they are better at predicting future interest rates than the market.

C. Risk of default is high from the floating interest rate payer if interest rates rise.

D. An interest rate swap is an internal hedging technique.

E. When interest rates are falling, the risk of default by the fixed interest rate payer is low.