A Swap Is a Method Used to Reduce Financial Risk

question 10

Multiple Choice

A swap is a method used to reduce financial risk.Which statement about swaps is NOT correct?

• A)A swap involves the exchange of cash payment obligations.
• B)The earliest swaps were currency swaps, in which companies traded debt denominated in different currencies, say, dollars and pounds.
• C)Swaps are very often arranged by a financial intermediary, which may or may not take the position of one of the counterparties.
• D)A problem with swaps is the short maturities, which has prevented the development of a secondary market.

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Definitions:

Clearly And Concisely

Expressing ideas or information in a straightforward and brief manner without losing clarity.

Accounting Improprieties

Actions or practices that deviate from accepted accounting practices and principles, often intended to manipulate financial statements.

Financial Targets

Specific goals set by a business related to financial performance measures, such as revenue, profit margins, or return on investment.

Audit Procedures

Actions taken by auditors to gather evidence regarding the accuracy, completeness, and validity of a company’s financial records and statements.