The difference between a currency swap and a foreign exchange swap is that:
A) in the currency swap, only the principal amount is exchanged
B) in the currency swap, only interest payments are ever exchanged
C) in the foreign exchange swap, only the principal amount is exchanged, whereas in a currency swap, a principal amount is usually exchanged at the outset and repayments occur over time involving both principal and interest
D) in the foreign exchange swap, only interest payments are exchanged

Question

Quizplus · Accepted Answer

In a currency swap, typically, both the principal and interest payments are exchanged between the parties, often involving different currencies. This exchange usually happens at the outset and then at the maturity of the agreement. In contrast, a foreign exchange swap primarily involves the exchange of principal amounts in two different currencies between parties at the beginning and the reversal of this exchange at a specified date, without the regular exchange of interest payments.

The Difference Between a Currency Swap and a Foreign Exchange