(Topic 7) A company has $75 million in adjustable-rate debt, $25 million in fixed-rate debt, and $50 million in accounts receivable. If the company is concerned that interest rates will rise, which…

The correct answer is C. $131,000. Company A anticipates the following cash inflows and outflows for the next three months: If the company's treasurer is preparing a cash-flow projection for Month 2, and he is focusing purely on items that can be projected with a fair degree of certainty, what will the net…

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Question

(Topic 7)

A company has $75 million in adjustable-rate debt, $25 million in fixed-rate debt, and $50 million in accounts receivable. If the company is concerned that interest rates will rise, which of the following would be the BEST interest rate derivative?

Options

A($119,000)
B($104,000)
C$131,000
D$146,000

How the community answered

(32 responses)

A
16% (5)
B
3% (1)
C
72% (23)
D
9% (3)

Explanation

Company A anticipates the following cash inflows and outflows for the next three months: If the company's treasurer is preparing a cash-flow projection for Month 2, and he is focusing purely on items that can be projected with a fair degree of certainty, what will the net projection be?

Topics

#interest rate derivatives#adjustable-rate debt#interest rate risk#hedging

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