Advantage of swap transaction

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Reference no: EM132073396

1. Which of the following statements is NOT an advantage of a swap transaction?

A. It usually allows the company to achieve a lower cost of funds.

B. It is used to hedge both interest rate risk and foreign exchange risk.

C. It facilitates the restructuring of cash flows associated with existing borrowings.

D. It transfers the credit risk to the counterparty.

2. If a company that had a fixed-rate liability wanted to achieve a floating-rate cost of funds through a swap, it would pay a:

A. fixed rate to the counterparty and receive a floating rate in return from the counterparty.

B. floating rate to the counterparty and pay a floating rate to the fixed-rate lender.

C. floating rate to the counterparty and pay a fixed rate to the fixed-rate lender.

D. floating rate to the counterparty and receive a fixed rate in return from the counterparty.

Reference no: EM132073396

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