Zia is an accountant and wishes to take out a Forward Rate Agreement (FRA) as a hedging instrument. The company treasurer has advised that a short-term interest rate (STIR) future would be better.
Which of the following is true of an STIR?
A . A STIR can be tailored to the exact needs of the company.
B . A STIR is flexible and the position can be closed quickly and easily.
C . A STIR must be kept for the whole duration of the contract.
D . If interest rates have gone down the price of the future will have fallen.
Answer: B
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