An FRA differs from an interest rate swap in which of the following ways?
A)An FRA has more credit risk
B)FRAs are federally regulated
C)Traditionally the payment in an FRA is delayed
D)FRAs are used only by banks and swaps are used only by corporations
E)none of the above

Question

Quizplus · Accepted Answer

The payment in an FRA is traditionally delayed, usually until the settlement date of the underlying asset, whereas in an interest rate swap, payments are typically made throughout the life of the contract. Option A is incorrect because both FRAs and interest rate swaps carry credit risk. Option B is incorrect because neither FRAs nor interest rate swaps are federally regulated. Option D is incorrect because both banks and corporations can use FRAs and interest rate swaps. Therefore, the correct answer is C.

An FRA Differs from an Interest Rate Swap in Which