When Two Parties Agree to Exchange a Set of Interest

question 23

Multiple Choice

When two parties agree to exchange a set of interest rate cash flows based on a notional principal,this transaction is called:

• A) cross-hedging.
• B) interest rate swap.
• C) cash flow swap.
• D) fixed-for floating swap.

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Definitions:

Internal Control

The processes and procedures implemented by an organization to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Budgeting Process

The activity of preparing a detailed financial plan for achieving the financial and operational goals of an organization.

Prime Costs

The combined costs of direct materials and direct labor that are directly attributable to the production of goods.

Production Budget

A Production Budget is an estimate of the number of units that must be manufactured to meet sales goals and, therefore, it details the cost of raw materials, labor, and other resources necessary for production.