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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?
Suggested Answer: B, C, E
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29 comments · newest first
HI
Hildred
12 months ago
I think keeping a STIR for the whole duration is a myth.
CR
Cristal
12 months ago
If rates drop, the future price does fall, that's true.
IE
Iesha
1 year ago
Wait, can you really close a STIR position that easily?
TE
Tegan
1 year ago
I disagree, FRAs can be tailored too.
ER
Erick
1 year ago
A STIR is definitely more flexible!
TI
Tijuana
1 year ago
I recall that if interest rates drop, it affects the pricing of futures, but I can't remember if that specifically means the price of the future will fall.
RO
Roosevelt
1 year ago
I feel like I studied that STIRs can be held for a specific duration, but I'm not certain if they must be kept for the whole contract.
EU
Eugene
1 year ago
I think option B sounds right because STIRs are often traded on exchanges, making them easier to close out compared to other instruments.
RO
Ronnie
1 year ago
I remember that STIRs are generally more standardized, so I'm not sure if they can be tailored exactly to a company's needs.
FR
Francine
1 year ago
Okay, let me walk through this step-by-step. Punishment can lead to undesirable emotions, aggressive behavior, or the punisher becoming aversive. But it's less likely to produce a more appropriate replacement behavior. I'll go with C.
JE
Jenelle
1 year ago
This seems like a straightforward question about insurance terminology. I'll read through the options carefully and choose the one that best fits the prompt.
ST
Stevie
1 year ago
This looks straightforward. I'd go with Option C to update Tia's name to Kimberly.
MA
Margot
1 year ago
Hmm, this looks like a tricky one. I'll need to carefully review the service protection limits and think about which metrics would be most relevant to ensure the API conforms to those limits.
JA
Jaleesa
1 year ago
Hmm, I'm not sure about this one. Maybe I should just ask the treasurer to explain the differences between FRAs and STIR futures in simple terms. Accountants aren't known for their finance skills, you know.
BO
Boris
1 year ago
User 3: That's true, a STIR is flexible and the position can be closed quickly and easily.
AV
Avery
1 year ago
User 2: A STIR can be tailored to the exact needs of the company.
RE
Reita
1 year ago
User 1: Maybe you should ask the treasurer for more information.
RA
Raylene
1 year ago
Wait, did the company treasurer actually suggest a STIR future? Sounds like they're trying to get Zia to lose money on the trade. I'd double-check that advice.
VI
Vi
1 year ago
C) A STIR must be kept for the whole duration of the contract.
MA
Mabelle
1 year ago
B) A STIR is flexible and the position can be closed quickly and easily.
TI
Tiffiny
1 year ago
A) A STIR can be tailored to the exact needs of the company.
MA
Marge
1 year ago
Option D is correct. If interest rates have gone down, the price of the future will have fallen, allowing me to profit from the hedging position.
LA
Lai
1 year ago
D) If interest rates have gone down the price of the future will have fallen.
TH
Thersa
1 year ago
B) A STIR is flexible and the position can be closed quickly and easily.
IZ
Izetta
1 year ago
A) A STIR can be tailored to the exact needs of the company.
CA
Carlton
1 year ago
I think option B is correct. STIR futures are flexible and can be closed quickly, unlike an FRA which is tailored to specific needs.
CH
Cherry
2 years ago
I agree with Talia, B) A STIR being flexible is important for managing risk effectively.
TA
Talia
2 years ago
I disagree, I believe B) A STIR is flexible and the position can be closed quickly and easily.
CL
Clarence
2 years ago
I think A) A STIR can be tailored to the exact needs of the company.