Interest rate and currency swaps allow one party to exchange a:
A) floating interest rate or currency value for a fixed value over the contract term.
B) fixed interest rate or currency value for a lower fixed value over the contract term.
C) floating interest rate or currency value for a lower floating value over the contract term.
D) fixed interest rate position for a currency position over the contract term.
E) None of these.

Question

Quizplus · Accepted Answer

Interest rate and currency swaps allow one party to exchange one type of interest rate or currency value for another. In an interest rate swap, one party exchanges a floating interest rate for a fixed interest rate or vice versa. In a currency swap, one party exchanges one currency for another. The purpose of these swaps is to manage risk and create more predictable cash flows. The fixed portion of the swap provides stability and predictability, while the floating portion allows for potential gains if market conditions are favorable.

Interest Rate and Currency Swaps Allow One Party to Exchange