Question: Strobel Company has a large amount of variable rate financing due in one year. Management is concerned about the possibility of increases in short-term rates.

Strobel Company has a large amount of variable rate financing due in one year. Management is concerned about the possibility of increases in short-term rates. Which of the following would be an effective way of hedging this risk?

a. Buy Treasury notes in the futures market.

b. Sell Treasury notes in the futures market.

c. Buy an option to purchase Treasury bonds.

d. Sell an option to purchase Treasury bonds.

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