Interest Rate Swaps

question 18

Multiple Choice

Interest rate swaps: 

• A) are a group of option contracts with varying expiration dates.
• B) are rarely used by U.S. business firms.
• C) can involve exchanging one floating-rate loan for another floating-rate loan.
• D) require two firms to have access to loans with equivalent terms.
• E) are all based on the U.S. T-bill index.

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Definitions:

Snowflakes

Ice crystals that form in clouds when water vapor freezes, creating unique patterns that fall to the ground as snow.

Interlocking Crystals

A texture in igneous rocks where the crystals are so closely fitted together that they interlock, providing strength and coherence to the rock.

Insulated

Protected from heat loss or gain by surrounding with material that reduces heat transfer, often used in reference to buildings or electrical components.

Dense

Having a high mass per unit volume; closely compacted in substance.