Firms exposed to the risk of interest rate changes may reduce that risk by
A) obtaining a Eurodollar loan.
B) hedging in the financial futures market.
C) hedging in the commodities market.
D) pledging or factoring accounts receivable.

Question

Quizplus · Accepted Answer

Hedging in the financial futures market involves purchasing futures contracts to lock in a specific interest rate. This can help mitigate the risk of interest rate changes for firms. Obtaining a Eurodollar loan or pledging/factoring accounts receivable may not directly address the risk of interest rate changes, and hedging in the commodities market is not relevant to this specific risk.

Firms Exposed to the Risk of Interest Rate Changes May