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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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28 comments · newest first
NI
Nieves
11 months ago
If rates drop, the future price should actually rise, right?
CH
Chuck
11 months ago
I think option C is misleading; you can close a STIR early.
BE
Bettina
11 months ago
Wait, can you really tailor a STIR to exact needs?
MA
Marva
12 months ago
I agree, closing a STIR position is super easy!
TA
Tawna
12 months ago
A STIR is definitely more flexible than a FRA.
BE
Beth
1 year ago
I vaguely recall that if interest rates drop, the value of a future might actually increase, so option D seems off to me.
JA
Janella
1 year ago
I’m a bit confused about option C. I thought you could close out a STIR before the contract ends if needed?
KA
Kati
1 year ago
I think option B sounds right because STIRs are often more liquid, allowing positions to be closed quickly.
CA
Cammy
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 like an FRA.
SH
Shay
1 year ago
If interest rates have gone down, the price of the STIR future should have risen, not fallen. I better double-check that detail.
EA
Earleen
1 year ago
Okay, I know STIR futures are standardized contracts, so the tailoring aspect is important. I'll focus on understanding the flexibility and closing out the position.
AL
Alonzo
1 year ago
This question seems straightforward, I think I can handle it. Let me think through the key differences between FRAs and STIR futures.
AN
Antione
1 year ago
Hmm, I'm a bit unsure about the flexibility of STIR futures compared to FRAs. I'll need to review my notes on the characteristics of each instrument.
EL
Eliz
1 year ago
Okay, I think I understand this. Okta is decrypting the Kerberos ticket and finding the username, but it's the IWA Agent and AD Agent that are actually doing the authentication against Active Directory. So the statement is not completely valid.
TI
Timothy
1 year ago
Hmm, I'm a bit unsure about this one. Should I decrease the values instead to optimize performance? I'm not totally clear on how the Working Set settings interact with the increased RAM.
MA
Marsha
2 years ago
Option D is incorrect - if interest rates fall, the price of the STIR future will actually rise, not fall. Gotta know your derivatives basics!
MO
Mohammad
1 year ago
A) A STIR can be tailored to the exact needs of the company.
MO
Mohammad
1 year ago
B) A STIR is flexible and the position can be closed quickly and easily.
ED
Edelmira
2 years ago
Hah, imagine being stuck in an FRA contract and interest rates go the wrong way. With a STIR future, at least you can run for the hills when things get dicey.
FR
Fredric
1 year ago
D) If interest rates have gone down the price of the future will have fallen.
JO
Joni
1 year ago
C) A STIR must be kept for the whole duration of the contract.
ME
Melina
1 year ago
B) A STIR is flexible and the position can be closed quickly and easily.
LO
Long
1 year ago
A) A STIR can be tailored to the exact needs of the company.
GE
Georgeanna
2 years ago
Option B is the correct answer. STIR futures allow you to adjust your position as needed, unlike being locked into a contract.
KA
Katlyn
2 years ago
A STIR future seems like the better option for Zia's hedging needs. It's flexible and can be closed out easily, unlike an FRA which is less customizable.
KI
King
2 years ago
I agree with Pok, B) A STIR is indeed flexible and can be closed quickly. It's a better option for Zia.
PO
Pok
2 years ago
I disagree, I believe B) A STIR is flexible and the position can be closed quickly and easily.
MA
Marya
2 years ago
I think A) A STIR can be tailored to the exact needs of the company.