When two borrowers engage in a currency swap,they agree to:
A) a one-time currency exchange equal to the principal amount borrowed.
B) make payments to each other in a different currency.
C) pay to each other any depreciation or appreciation of the currency.
D) exchange fixed-rate interest payments for variable-rate interest payments.

Question

Quizplus · Accepted Answer

When two borrowers engage in a currency swap, they agree to make payments to each other in a different currency. This is done to manage and mitigate risks associated with fluctuations in currency exchange rates. The borrowers agree on a fixed exchange rate for the duration of the swap, which allows them to budget and plan accordingly.

When Two Borrowers Engage in a Currency Swap,they Agree To