When an Interest-Only Swap Is Established on an Amortizing Basis

question 82

Multiple Choice

When an interest-only swap is established on an amortizing basis

• A)the debt service exchanges decrease periodically through time as the hypothetical notational principal is amortized.
• B)the debt service exchanges are the same each year, but the level of interest and principal changes as the loans amortize.
• C)there is no such thing as an amortizing interest-only swap.
• D)none of the above

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Definitions:

Optimizing

Optimizing involves making the best or most effective use of a situation or resource, often by balancing different factors or constraints.

Herbert Simon

An American economist, political scientist, and cognitive psychologist known for his contributions to decision-making processes and artificial intelligence.

Satisfactory Alternatives

Acceptable options or solutions that are considered adequate for meeting a particular need or solving a problem, albeit not necessarily the best possible ones.

Optimal Decisions

The process of choosing the best possible solution or course of action from among various alternatives based on specific criteria and objectives.