Swapping an obligation to pay interest at a specified fixed or floating rate for payments representing the total return on a loan or a bond of a specified amount is an example of
A)a commodity swap.
B)a credit swap.
C)a currency swap.
D)an equity swap.
E)an interest rate swap.

Question

Quizplus · Accepted Answer

This is an example of a credit swap, specifically a total return swap, where one party receives interest payments based on a fixed or floating rate in exchange for payments that reflect the total return (interest payments plus any capital gains or losses) on a specified loan or bond.

Swapping an Obligation to Pay Interest at a Specified Fixed