A Floating Rate Borrower Who Enters an Interest Rate Swap

question 37

Multiple Choice

A floating rate borrower who enters an interest rate swap as the fixed-rate payer will:

• A)now make fixed rate interest payments to their lender
• B)agree to pay fixed interest payments and receive floating interest payments through the swap contract
• C)receive swap interest payments based on the swap rate
• D)make the swap cash settlement payments when the BBSW exceeds the swap rate.
• E)None of these are correct.

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Definitions:

Separate Business Organization

An entity that operates independently from other business entities, often with its own legal and tax considerations.

Sole Proprietorship

A business owned and operated by a single individual, with no separation between the business and the owner.

Owner

An individual or entity that has the legal right, title, and interest in property or assets.

Business

An entity engaged in commercial, industrial, or professional activities with the aim to produce profit or fulfill a charitable mission.