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      Question

      Which of the following is a tool for managing interest

      rate risk?
      A Credit Default Swap (CDS) Correct Answer Incorrect Answer
      B Collateralized Debt Obligation (CDO) Correct Answer Incorrect Answer
      C Interest Rate Swap (IRS) Correct Answer Incorrect Answer
      D Letter of Credit (LC) Correct Answer Incorrect Answer
      E Factoring Correct Answer Incorrect Answer

      Solution

      An IRS is a derivative contract where two parties exchange interest rate payments (usually fixed for floating) to hedge against or manage exposure to fluctuations in interest rates.

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