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If You Funded a Fixed-Income Investment Portfolio with Short-Term Deposits

Question 169

Multiple Choice

If you funded a fixed-income investment portfolio with short-term deposits, how would you hedge your interest rate exposure with interest rate swaps?


A) Pay fixed and receive floating through swaps for t
B) Pay floating and receive fixed through swaps for t
C) You cannot : the maturity of the swaps would be lo
D) You should not: there would be too much basis risk

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