Finance companies participate in the ____ market to reduce interest rate risk.

Name: Finance companies participate in the ____ market to reduce interest rate risk.
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Question

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Finance companies participate in the swap market to reduce interest rate risk. In a swap agreement, two parties agree to exchange cash flows based on a fixed-rate and a floating-rate interest rate. This helps finance companies manage their interest rate risk by swapping their floating-rate payments for fixed-rate payments, or vice versa.

Finance Companies Participate in the ____ Market to Reduce Interest