Unlike the situation with exchange rate risk, there is no uncertainty on the part of management for shareholder preferences regarding interest rate risk. Shareholders prefer that managers hedge interest rate risk rather than having shareholders diversify away such risk through portfolio diversification.

Question

Quizplus · Accepted Answer

Shareholder preferences regarding interest rate risk management can vary. Some may prefer that the company hedges against such risks to protect earnings, while others might believe they can manage this risk more effectively through their own portfolio diversification strategies. There is no one-size-fits-all preference among shareholders regarding the management of interest rate risk.

Unlike the Situation with Exchange Rate Risk, There Is No