Consider a currency swap where two companies issue bonds in the other's bond market and enter into an agreement. This agreement requires that ________.

Question

Quizplus · Accepted Answer

A currency swap involves two companies issuing bonds in the other's bond market and entering into an agreement. This agreement requires both parties to exchange the proceeds received from the sale of the bonds. Furthermore, both parties agree to make the coupon payments to service the debt of the other party. Finally, both parties agree to exchange the par value of the bonds with the exchange coming at the termination date of the currency swap (which coincides with the maturity of the bonds). Hence, all three options mentioned in the given choices are correct.

Consider a Currency Swap Where Two Companies Issue Bonds in the Other's