Which of the following is an example of a "swap"?
A)Right to buy 100 shares of CIBC over the next 5 years.
B)Commitment to buy 100 barrels of oil next month at $125/barrel.
C)Commitment to buy $100,000 US dollars in 4 months at US$=1.10.
D)Pay interest at prime +3% in exchange for receiving interest at 5%.

Question

Quizplus · Accepted Answer

Choice D is an example of a "swap" because it involves exchanging one type of interest payment for another. In this case, the party is paying interest at a higher rate (prime +3%) in exchange for receiving interest at a lower rate (5%). Choices A, B, and C are not examples of swaps as they do not involve the exchange of one type of financial instrument or obligation for another.

Which of the Following Is an Example of a "Swap