In a fixed-for-floating interest rate swap:
A)Counter-party A pays Counter-party B an amount calculated according to a floating interest rate in return for an amount calculated on the basis of a fixed interest rate.
B)The amounts payable depend on the notional principal.
C)Only interest flows are involved until maturity,when the principal is exchanged based on the difference in the amounts calculated according to a floating interest rate and a fixed interest rate.
D)Counter-party A pays Counter-party B an amount calculated according to a floating interest rate in return for an amount calculated on the basis of a fixed interest rate and the amounts payable depend on the notional principal.

Question

Quizplus · Accepted Answer

In a fixed-for-floating interest rate swap, Counter-party A pays Counter-party B an amount calculated according to a floating interest rate in return for an amount calculated on the basis of a fixed interest rate. The amounts payable depend on the notional principal. Only interest flows are involved until maturity, when the principal is not exchanged, but the final interest payments are calculated based on the difference in the amounts calculated according to a floating interest rate and a fixed interest rate. Therefore, choice D is correct.

In a Fixed-For-Floating Interest Rate Swap