What type of instrument can be helpful toll for governmental entities hedging the interest rate risk associated with their bond issue?

Question

Quizplus · Accepted Answer

Derivatives, such as interest rate swaps or futures contracts, can be used by governmental entities to hedge against the interest rate risk associated with their bond issue. These instruments allow the entity to lock in a specific interest rate, protecting them from potential rate increases in the future. Money markets, commercial paper, and pooled funds are not specifically designed for interest rate hedging.

What Type of Instrument Can Be Helpful Toll for Governmental