Under which conditions would one be MOST LIKELY to see an interest rate swap?
A)A borrower wants a fixed rate loan,but the bank only offers floating rate loans; the borrower "swaps" loans with someone who has a fixed rate loan
B)A borrower does not have enough equity for a conforming loan,so he or she takes out a "second" mortgage loan
C)A borrower does not have enough equity for a conforming loan,so he or she "swaps" mortgage insurance for increased equity investment
D)A bankruptcy court orders a lender to "swap" a debtor's high interest rate for a lower interest rate

Question

Quizplus · Accepted Answer

Interest rate swaps are typically used by borrowers who want to convert a floating rate loan into a fixed rate loan, or vice versa. In this scenario, the borrower wants a fixed rate loan but the bank only offers floating rate loans, so they "swap" loans with someone who has a fixed rate loan. This allows the borrower to convert their loan to a fixed rate without having to go through the process of refinancing with a different lender.

Under Which Conditions Would One Be MOST LIKELY to See