One Reason Swaps Are Desirable Is That

question 38

Multiple Choice

One reason swaps are desirable is that

• A) they are free of credit risk.
• B) they have no transactions costs.
• C) they increase interest rate volatility.
• D) they increase interest rate risk.
• E) they offer participants easy ways to restructure their balance sheets.

---

Definitions:

Elastic

Describes a situation in which the supply or demand for a good or service is highly responsive to changes in price.

Excess Capacity

A situation where a firm is producing at a level less than its maximum possible output, leading to unused resources.

Equilibrium Level

The equilibrium level is a state where supply and demand balance each other, and market forces such as price remain stable.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power.