An Interest Rate Swap Allows an MNC to Change the Nature

question 30

Multiple Choice

An interest rate swap allows an MNC to change the nature of its debt from a ________.

• A) fixed interest rate to a floating interest rate
• B) local bank interest charge to a international bank interest charge
• C) pegged currency exchange system to a floating currency exchange system
• D) debt security to an equity security

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Definitions:

Settlement

The conclusion of a transaction or the resolution of a claim or dispute, usually involving the transfer of funds or assets.

Clean-Up Provision

A clause in a financial contract that requires the borrower to pay off a loan or line of credit in full after a specified period or under certain conditions, to ensure the credit line is periodically brought to a zero balance.

AASB 137

An Australian accounting standard that deals with the accounting for provisions, contingent liabilities, and contingent assets.