24-9 the Party in a Swap That Receives Fixed-Rate Payments

question 20

True/False

24-9 The party in a swap that receives fixed-rate payments will always have zero basis risk since the fixed-rate swap payments can be structured to cover the fixed-rate liability payments.

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Definitions:

Target Capital Structure

The optimal mix of debt, equity, and other securities a company aims to hold, balancing risk and return to maximise shareholder value.

Flotation Costs

Financial outlays a business faces when it issues new stocks, covering charges for underwriting, legal services, and registration documentation.

Retained Earnings

The portion of a company's profits that is kept or retained within the company instead of being paid out to shareholders as dividends, often used for investment or to pay off debt.

IRR

Internal Rate of Return; a financial measurement tool utilized to assess the potential profit of investment opportunities.