Currency swaps are often used to provide long-term financing in foreign currencies because

Question

Quizplus · Accepted Answer

Currency swaps can be used to provide long-term financing in foreign currencies when long-term capital markets and forward foreign exchange markets are not well developed. Thus, option A is correct. Additionally, currency swaps allow parties to exchange interest and principal payments in different currencies, which can hedge against currency risk. This makes currency swaps a useful tool for long-term financing in foreign currencies even when forward exchange markets are absent. Thus, option B is also correct. Option C is incorrect as it is not related to the use of currency swaps for long-term financing in foreign currencies.

Currency Swaps Are Often Used to Provide Long-Term Financing in Foreign