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There are several different types of derivative securities, including forwards, futures, swaps, inverse floaters, and structured notes. These securities may be used to manage the
There are several different types of derivative securities, including forwards, futures, swaps, inverse floaters, and structured notes. These securities may be used to manage the risks of business organizations or to speculate on certain market events. Consider the descriptions or characteristics in the following table and indicate the type of derivative to which each corresponds: GizmonTech Corp. (GTC) is an American firm that has issued $50 million of U.S. dollar-denominated bonds to fund a project in Italy. Its bankers have found a company in Italy that has issued 550 million of euro-denominated bonds to finance a project in the United States. Which of the following derivatives transactions would help both companies eliminate their exposures to exchange rate risk? Inverse floater Currency swap Interest rate swap Structured note An investor believes the 15-year Treasury yield is too low. This investor thinks a Treasury bond with 15 years to maturity is
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