Currency Swaps Are Used To

question 56

Multiple Choice

Currency swaps are used to:

• A) lock in an exchange rate for future delivery of a foreign currency.
• B) effectively transform loans originated in one currency to a different currency.
• C) transform fixed-rate loans into variable-rate loans.
• D) exchange foreign currencies in amounts not possible in the foreign exchange market.

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Definitions:

Personal Taxes

Taxes levied on the income or assets of individuals, as opposed to taxes imposed on companies.

Corporate Debt

Financial obligations incurred by companies through borrowing, issuing bonds, or other financial instruments to support operations or growth.

Financial Leverage

The use of borrowed money (debt) to amplify the potential returns from an investment, increasing risk and potentially reward.

Financial Distress

A condition in which a company cannot generate the revenues or income necessary to meet its financial obligations, which may lead to bankruptcy.