A Swap Is a Method Used to Reduce Financial Risk

question 9

Multiple Choice

A swap is a method used to reduce financial risk.Which of the following statements about swaps, if any, is NOT CORRECT?

• A) The earliest swaps were currency swaps, in which companies traded debt denominated in different currencies, say dollars and pounds.
• B) Swaps are very often arranged by a financial intermediary, who may or may not take the position of one of the counterparties.
• C) A problem with swaps is that no standardized contracts exist, which has prevented the development of a secondary market.
• D) A company can swap fixed interest payments for floating interest payments.
• E) A swap involves the exchange of cash payment obligations.

Comprehend the process and accounting entries for borrowing via notes payable and the impact of interest rates on these transactions.

Calculate and interpret the carrying amount of installment notes over different periods.

Recognize the characteristics and accounting treatments of different types of liabilities, including remote and probable contingencies.

Understand the significance and calculation methods of working capital, current ratio, and quick assets.