Which of the following statements is true?
A)The reason why in a currency swap it is usual to include both principal and interest payments as part of the swap agreement is that both principal and interest are exposed to foreign exchange risk.
B)In a currency swap it is usual to include both principal and interest payments as part of the swap agreement as this makes the currency conversion less complex.
C)In a currency swap it is usual to include both principal and interest payments as part of the swap agreement as otherwise it is impossible to value the swap.
D)It is not usual to include both principal and interest payments as part of the swap agreement.

Question

Quizplus · Accepted Answer

Including both principal and interest payments in a currency swap agreement helps to hedge against foreign exchange risk, which affects both the principal amount and interest payments. This makes the swap more comprehensive and effective in managing currency risk.

Which of the Following Statements Is True