Company X and Company Y Have Mirror-Image Financing Needs (They

question 77

Multiple Choice

Company X and company Y have mirror-image financing needs (they both want to borrow equivalent amounts for the same amount of time. Company X has a AAA credit rating, but company Y's credit standing is considerably lower.

• A)Company X should demand most of the QSD in any swap with Y as compensation for default risk.
• B)Since Y has a poor credit rating, it would not be a participant in the swap market.
• C)Company X should more readily agree to a swap involving Y if there is also a swap bank providing credit risk intermediation.
• D)both a and c

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