Which of the Following Describes a Major Way in Which

question 113

Multiple Choice

Which of the following describes a major way in which currency swaps differ from interest-rate swaps?

• A) The notional amount is exchanged in a currency swap, but not in an interest-rate swap
• B) Currency swaps include only interest payments in more than one currency
• C) Interest-rate swaps may include more than one currency, currency swaps include one currency
• D) The notional amount is exchanged in an interest-rate swap, but not in a currency swap

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Definitions:

Par Value

The face value of a bond or the stock value stated in the corporate charter, often used in reference to bonds.

Immunization

A strategy used in fixed income to shield a portfolio from interest rate fluctuations by aligning the durations of assets and liabilities.

Duration Matching

Duration matching is an investment strategy used to minimize the interest rate risk by matching the duration of assets and liabilities, ensuring changes affect both sides similarly.

Yield Curve

A graph showing the relationship between bond yields and their maturity dates, commonly used to predict economic changes.