A transaction in which two firms trade individual financing advantages to produce more favorable borrowing terms for each is know as a(n):

Question

Quizplus · Accepted Answer

An interest rate swap involves two firms exchanging financing advantages, usually swapping fixed and floating interest rates, to achieve more favorable borrowing terms for each. Sequential and cross hedges are types of risk management strategies used in financial markets, not related to interest rate swaps. Therefore, the correct answer is A) interest rate swap.

A Transaction in Which Two Firms Trade Individual Financing Advantages