Interest Rate Swaps Allow a Firm to Exchange Fixed for Floating-Rate

question 14

True/False

Interest rate swaps allow a firm to exchange fixed for floating-rate payments, but a swap cannot reduce actual net interest expenses.

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Definitions:

Common Law

Common Law is a body of unwritten laws based on legal precedents established by the courts.

Mirror Image

A rule in contract law stating that an offer must be accepted exactly with no modifications; the acceptance must "mirror" the offer.

Mutual Assent

Mutual assent is the agreement between parties to enter into a contract, demonstrated by offer and acceptance.

Counteroffer

A proposal made in response to an initial offer, containing different terms that must be accepted for a contract to be legally binding.