A plain vanilla interest-rate swap is an agreement to exchange a series of periodic payments,one computed at a fixed rate and the other at
A)A floating rate indexed to a money-market rate in the same currency (e.g. ,Libor).
B)A floating rate linked to the return on any financial index,e.g. ,an equity index.
C)A floating rate indexed to a money-market rate in the same or a different currency.
D)A floating rate indexed to a commodity (e.g. ,gold)price.

Question

Quizplus · Accepted Answer

A plain vanilla interest-rate swap typically involves exchanging fixed-rate payments for floating-rate payments indexed to a money-market rate in the same currency, such as Libor. This is the most common type of interest-rate swap. The other options listed involve more exotic types of swaps that are less commonly traded.

A Plain Vanilla Interest-Rate Swap Is an Agreement to Exchange