Can anyone help to explain the below answer? I was certain A) was correct; but this is wrong and their explanation does not really work for me.
The questions was:
Which of the following statements regarding a firm that currently has fixed-rate, noncallable domestic debt outstanding is least accurate? The firm:
A) Can turn debt into floating rate by entering a recieve fixed swap position
B) can turn the debt into callable debt by entering into a receiver’s swaption position
c) is exposed to an increase in interest rates.
I chose A, but this was incorrect.
The correct answer was C)
The explanation given was:
The firm isn’t concerned with rising rates. If rates fall, however, they face an increase in the value of their liabilities or market value risk (which is a type of interest rate risk).