What Is the Basic Reason That Two Counterparties Enter into a Swap

question 14

Multiple Choice

What is the basic reason that two counterparties enter into a swap agreement?

• A)Exchange of one specified cash flow in the future based on some underlying index.
• B)Better management of credit risk by using a fixed or floating rate bond as hedging instrument.
• C)To restructure or off-set the expected future cash flows to be collected from assets or liabilities held on the balance sheet.
• D)Exchange of assets for a specific period of time at a specified interval.
• E)Taking the opposite side of each transaction in order to keep the swap market liquid.

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Definitions:

Psychoactive Drugs

Substances that affect the mind, altering mood, perception, or brain function.

Perception

The process by which individuals organize and interpret sensory information to form a meaningful picture of the world.

Central Nervous System

The complex of nerve tissues that controls the activities of the body. In vertebrates, it comprises the brain and the spinal cord.

Stimulant

A type of drug that increases activity in the central nervous system, causing increased alertness, attention, and energy.