Consider the following five statements:
i. Swaps may be used to achieve a lower cost of funds for a
company.
ii. In an interest rate swap, the two parties swap the principal
amount plus the ongoing associated interest obligations.
iii. An intermediated swap is said to be ‘matched' when a bank
enters into swaps with both firms involved in an interest rate
swap.
iv. A ‘plain vanilla' swap is the fixed AUD to floating AUD
swap.
v. If an intermediary is involved in a swap between two parties,
the intermediary will also provide the initial loan to both
parties.
How many of these statements are true and how many are false?
Select one:
a. 3 statements are true and 2 are false
b. 2 statements are true and 3 are false
c. 4 statements are true and 1 is false
d. 1 statement is true and 4 are false
Ans b. 2 statements are true and 3 are false
i. Swaps may be used to achieve a lower cost of funds for a
company.
ii. In an interest rate swap, the two parties swap the principal
amount plus the ongoing associated interest obligations.
iii. An intermediated swap is said to be ‘matched' when a bank
enters into swaps with both firms involved in an interest rate
swap.
iv. A ‘plain vanilla' swap is the fixed AUD to floating AUD
swap.
v. If an intermediary is involved in a swap between two parties,
the intermediary will also provide the initial loan to both
parties.
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