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Question 6

After moving across to Commonwealth Bank as a new client, Michael Wilson’s debt profile includes loans totalling $25m. His existing hedge of $12m was novated across and is now expiring in 12 months’ time.

Sarah, the Global Markets Specialist, has been providing Michael with updates for the last six months and he is now considering some Interest rate risk management solutions. He has the option to hedge his debts for a five year term with the Bank.

Which of the following statements is true?

Michael Wilson talking with Sarah, the Global Markets Specialist