CIMA Exam CIMAPRO19-P03-1 Topic 6 Question 38 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam

Question #: 38
Topic #: 6

Which of the following are true of interest rate swaps?

ARisk of default is high from the floating interest rate payer if interest rates rise.

BAn interest rate swap is an external hedging technique.

CWhen interest rates are falling, the risk of default by the fixed interest rate payer is low.

DSome companies use interest rate swaps to deliberately increase their risks because they believe that they are better at predicting future interest rates than the market.

EAn interest rate swap is an internal hedging technique.

Show Suggested Answer

Suggested Answer: A, B, D

by Talia at Sep 23, 2022, 12:35 AM

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Margo

16 hours ago

I think answer B is correct. An interest rate swap is an external hedging technique, as it involves a contract with another party to manage interest rate risk.

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