Interest rate swaps and cross-currency swaps permit a counterparty to exchange a:
A) floating interest rate payment or currency value for a lower floating payment value over the term.
B) fixed interest rate position for a currency position over the contract term.
C) floating interest rate payment or currency value for a fixed payment value over the contract term.
D) fixed interest rate payment or currency value for a fixed value over the contract term.

Question

Quizplus · Accepted Answer

Interest rate swaps and cross-currency swaps allow parties to exchange a floating interest rate payment or currency value for a fixed payment value over the contract term. This can provide certainty and stability for cash flow management. Option A is incorrect because it states a lower floating payment value, which may not be the case. Option B is incorrect because fixed interest rate positions are not typically exchanged in these types of swaps. Option D is incorrect because it is too broad and does not specify which type of swap is being referred to.

Interest Rate Swaps and Cross-Currency Swaps Permit a Counterparty to Exchange