Local Governments Often Have Variable Rate Debt and Hedge the Related

Multiple Choice

Local governments often have variable rate debt and hedge the related interest rate risk with an interest rate swap. These governments incur gains on these swaps when:

A) They invest in receive fixed/pay variable interest rate swaps and interest rates go down.
B) They invest in receive variable/pay fixed interest rate swaps and interest rates go up.
C) They invest in receive variable/pay fixed interest rate swaps and interest rates go down.
D) They invest in receive fixed/pay variable interest rate swaps and interest rates go up.