Which of the Following Is an Advantage of Having Swap

question 52

Multiple Choice

Which of the following is an advantage of having swap dealers?

• A)They serve the function of taking the opposite side of each transaction in order to keep the swap market liquid.
• B)They reduce the search costs of finding counterparties having mirror image financing requirement.
• C)They generally guarantee swap payments over the life of the contract.
• D)They incur any costs associated with the default by replacing the defaulting party on the same terms as the original swap.
• E)All of the above.

---

Definitions:

Equation of Exchange

An economic equation that relates the quantity of money, its velocity, and the price level of goods and services to the nominal value of transactions.

Inflation Rate

The uptick in percentage of goods and services' prices in an economy throughout a certain duration.

Annual Income

The total amount of income earned over a year from all sources including wages, salaries, bonuses, dividends, and interest.

Nominal Interest Rate

The rate of interest charged on a loan without taking the inflation rate into account.