A company that wishes to lock in an interest rate on future borrowing can either enter into a forward rate agreement (FRA)or it can borrow long-term funds and lend short-term.

Question

Quizplus · Accepted Answer

A company can enter into a forward rate agreement to lock in an interest rate on future borrowing, or they can borrow long-term funds and lend short-term, but they cannot do both simultaneously.

A Company That Wishes to Lock in an Interest Rate