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The Reliable Insurance Company sells fixed rate annuities as part of its product mix and uses the proceeds to invest in floating rate notes. What kind of interest rate change should they hedge against and which is the most appropriate hedging strategy? They would be concerned with interest rates: A. increasing and would hedge this risk by selling a floor and buying a cap. B. decreasing and would hedge this risk by selling a cap and buying a floor. C. decreasing and would hedge this risk by buying a cap and selling a floor. |