Which of the Following Is NOT a Reason That a Swap

question 90

Multiple Choice

Which of the following is NOT a reason that a swap may have less credit risk than an individual loan?

• A)Netting of payments.
• B)Payment flows are interest and not principal.
• C)Standby letters of credit are available.
• D)Swaps can be cancelled, individual loans cannot.
• E)None of the above.

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Definitions:

Agency Relationship

A legal bond in which one person, the agent, acts on behalf of another, the principal, in transactions with third parties.

Principal

In finance, the original amount of money invested or loaned, before interest.

Agent

An individual or entity authorized to act on behalf of another person or entity, known as the principal, in various transactions or negotiations.

Fiduciaries

Individuals or organizations entrusted to manage assets or decisions for another party, often with a legal obligation to act in the latter's best interest.