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Question
Q. With regard to the Foreign Currency Swap Agreements, consider the following statements:
Which of the statement(s) given above is/are correct?
Q. With regard to the Foreign Currency Swap Agreements, consider the following statements:
Which of the statement(s) given above is/are correct?
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Solution
The correct option is C Both 1 and 2
Explanation:
Statement 1 is correct: The fixed-for-fixed currency swap involves exchanging fixed interest payments in one currency for fixed interest payments in another.
Statement 2 is correct: In the fixed-for-floating swap, fixed interest payments in one currency are exchanged for floating interest payments in another. In the latter type of swap, the principal amount of the underlying loan is not exchanged.
Explanation:
Statement 1 is correct: The fixed-for-fixed currency swap involves exchanging fixed interest payments in one currency for fixed interest payments in another.
Statement 2 is correct: In the fixed-for-floating swap, fixed interest payments in one currency are exchanged for floating interest payments in another. In the latter type of swap, the principal amount of the underlying loan is not exchanged.
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