Which of the Following Statements About a Swap Instrument Is

question 31

Multiple Choice

Which of the following statements about a swap instrument is correct?

• A) A company may seek to swap a short-term loan for a long-term loan (or vice versa). Another type of swap is where a company swaps a loan denominated in local currency for a foreign currency loan. After the swap agreement has been made, the primary borrower no longer has a commitment to the primary lender.
• B) A company may seek to swap a fixed interest loan for a variable rate interest loan (or vice versa). Another type of swap is where a company swaps a loan denominated in local currency for a foreign currency loan. After the swap agreement has been made, the primary borrower still has a commitment to the primary lender should the other party to the swap default on the arrangement.
• C) A company may seek to swap a compound interest loan for a simple interest rate loan (or vice versa). Another type of swap is where a company swaps a fixed interest rate loan for a variable interest rate loan (or vice versa). The swap agreement is enforceable by both parties and the risk of default by either party is minimal.
• D) A company may seek to swap a short-term loan for a long-term loan (or vice versa). Another type of swap is where a company swaps a portion of its shares for the shares in another company. After the swap agreement has been made, the relationship between the two companies is stronger and can form the basis of an ongoing strategic alliance.

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Definitions:

Strategic Fit

The alignment between an organization's strategic goals and the resources and capabilities at its disposal to achieve them.

Target Market

A specific group of consumers at which a product or service is aimed, characterized by shared demographic or psychographic traits.

Success

The achievement of a goal or target, often measured by specific criteria or standards, such as profit, recognition, or accomplishment of personal or professional objectives.

Targeting Strategy

A marketing approach that involves identifying and reaching specific groups within a broader market, based on shared characteristics or needs.