Interest rate swaps involve the exchange of ________________.
A) fixed rate bonds for floating rate bonds
B) floating rate bonds for fixed rate bonds
C) net interest payments and an actual principal swap
D) net interest payments based on notional principal, but no exchange of principal

Question

Quizplus · Accepted Answer

Interest rate swaps involve the exchange of net interest payments based on notional principal, but no exchange of principal. Choice A and B are incorrect as they involve the exchange of bonds rather than interest payments. Choice C is incorrect as it suggests an exchange of actual principal, which is not a feature of interest rate swaps.

Interest Rate Swaps Involve the Exchange of ________________