Interest rate swaps involve the exchange of ________.
A) actual fixed-rate bonds for actual floating-rate bonds
B) actual floating-rate bonds for actual 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 a notional principal amount. This means that no actual exchange of principal takes place. The parties involved only exchange cash flows based on the difference between the fixed and floating interest rates.

Interest Rate Swaps Involve the Exchange of ________