______ can also act as a tool for investors who wants to hedge against the risk of falling interest rates.

A. Inverse floaters
B. Floaters
C. Guarantee certificates

Correct Answer: A

If an investor has invested in regular bonds, and if the interest rate falls, then they will receive lower returns than expected. In this scenario, it is extremely helpful to have inverse floaters in the portfolio as it gives higher returns when interest rates fall.