An Interest Rate Swap Is Commonly Used by an Issuer

question 29

Multiple Choice

An interest rate swap is commonly used by an issuer of fixed-rate bonds to:

• A) convert to floating-rate debt.
• B) hedge exchange rate risk.
• C) lock in the interest payments on debt.
• D) remove the default risk of its debt.

---

Definitions:

Hull's Concept

The theoretical framework established by Clark L. Hull, proposing that human behavior is a result of internal biological drives that are learned and influenced by the environment.

Incentives Influence

The way rewards or punishments motivate individuals to adopt particular behaviors.

Partial Reinforcement

A technique in behavioral psychology where a behavior is reinforced only some of the time, leading to more resistant behavior to extinction.

Lever Pressing

A behavior often studied in operant conditioning experiments where an animal manipulates a lever to receive a reward or avoid a punishment.