Which of the Following Statements Regarding a Cross-Currency Swap Is

question 25

Multiple Choice

Which of the following statements regarding a cross-currency swap is incorrect?

• A) There is an exchange of principal amounts between counterparties at the beginning and end of the swap.
• B) The re-exchange at the conclusion of a cross-currency swap usually takes place at the initial exchange rate.
• C) As the cross-currency swap is arranged through a bank, there is no credit risk.
• D) Once the cross-currency swap rate is determined, cash flows are known with certainty.

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Definitions:

Accounts Payable

Liabilities owed by a business to its creditors for purchases or services rendered that are expected to be paid off within a year.

Inventory Reduction

A strategy to decrease the amount of inventory that a company holds in order to improve cash flow or reduce storage costs.

Tax Refund

The amount of money returned to a taxpayer by the government when the taxpayer's paid taxes exceed their tax liability for a given year.