An interest rate swap contract whose notional principal can vary due to changes in market interest rates is known as a(n):
A) Variable principal swap
B) Variable rate swap
C) Index amortizing rate swap
D) Fluctuating notional swap
E) None of the above

Question

Quizplus · Accepted Answer

An Index Amortizing Rate Swap (IARS) is a type of interest rate swap where the notional principal amount can vary based on changes in a specified market interest rate index. This allows the principal amount to amortize down more quickly when interest rates rise, and less quickly when rates fall.

An Interest Rate Swap Contract Whose Notional Principal Can Vary