Interest rate swaps can guarantee that
A)inflows more closely match outflows.
B)participants never hold fixed-rate instruments.
C)participants never hold variable-rate instruments.
D)all intermediaries will hold both fixed-rate and variable-rate assets.

Question

Quizplus · Accepted Answer

Interest rate swaps allow two parties to exchange their cash flows from different types of interest rates. This means that participants can align their inflows with their outflows, thereby guaranteeing that they closely match. This helps reduce uncertainties associated with interest rates and provides stability to cash flows. The other options are not true statements about interest rate swaps.

Interest Rate Swaps Can Guarantee That