How can the portfolio manager use futures markets to protect against the risk exposure of rising interest rates?
A)Buy interest rate futures.
B)Sell currency futures.
C)Buy currency futures.
D)Sell interest rate futures.
E)Sell stock market index futures.

Question

Quizplus · Accepted Answer

The portfolio manager can use futures markets to protect against the risk exposure of rising interest rates by selling interest rate futures. This is because as interest rates rise, the value of existing bond holdings will fall, but the futures contracts sold will profit, offsetting the loss in bond values. By selling interest rate futures, the portfolio manager can lock in a fixed rate, thus limiting the impact of rising interest rates.

How Can the Portfolio Manager Use Futures Markets to Protect