Cashflows corresponding to different interest rates

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An interest rate swap is an agreement between two parties to trade cashflows corresponding to different interest rates. It reduces or increases exposure to interest rate fluctuations and can get marginally lower interest rates. The manager can switch back and forth between floating or fixed interest rates quickly and cheaply as the forecasted rate changes. It minimizes risk and improves the return because the interest rate can change as needed.

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Reference no: EM131508810

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