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If a floating rate borrower hedges their interest rate risk by entering a swap as the fixed rate payer, and the swap subsequently develops a
If a floating rate borrower hedges their interest rate risk by entering a swap as the fixed rate payer, and the swap subsequently develops a negative value:
A. | then the borrower has paid higher than expected interest to their lender. | |
B. | then the borrower has paid lower than expected interest to their lender. | |
C. | then the swap has not been an effective hedge. | |
D. | the cost of funds will exceed the swap rate. | |
E. | the cost of funds for the borrower will rise. |
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