Firms that use maturity hedging as a guide to financing policy:
A) try to hedge with futures contracts.
B) hold excess cash balances to reduce risk.
C) will finance long term assets with long term financing.
D) rely on government policy to keep interest rates low.

Question

Quizplus · Accepted Answer

Maturity hedging involves matching the maturity of assets with the maturity of the financing used to fund those assets. Therefore, firms practicing maturity hedging will finance long-term assets with long-term financing to mitigate interest rate risk and refinancing risk.

Firms That Use Maturity Hedging as a Guide to Financing