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Know how a firm can hedge its interest rate risk on a short-term fixed or variable rate bank loan or on a fixed or variable
Know how a firm can hedge its interest rate risk on a short-term fixed or variable rate bank loan or on a fixed or variable rate short-term investment using the interest rate swap market. Know how to determine the absolute and comparative advantage between two firms if given the type of loans and the loan rates they currently hold or can borrow at from their banks. Understand how to determine the total gain from an interest rate swap and explain how this would be done.
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