If using a Treasury bill futures contract to offset a commercial paper position,the financial manager should ensure that

Question

Quizplus · Accepted Answer

The financial manager should ensure that the movement in Treasury bill rates and commercial paper rates are closely correlated because the purpose of using the Treasury bill futures contract is to hedge the risk of changes in interest rates. If the rates on the two vehicles are not correlated, the hedge may not be effective. The other options are not relevant considerations for this strategy.

If Using a Treasury Bill Futures Contract to Offset a Commercial