An Interest Rate Swap Is a Succession of Forward Contracts

question 69

True/False

An interest rate swap is a succession of forward contracts on interest rates arranged by two parties that allows for the exchange of fixed-interest payments for floating payments; as such, it allows an FI to place a long-term hedge.

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Definitions:

Fraudulent Misrepresentation

An intentional false statement of a material fact made by one party to induce another party to enter into a contract.

Duress

Any unlawful act or threat exercised on a person whereby the person is forced to enter into an agreement or to perform some other act against his or her will.

Negligent Misrepresentation

A false statement made carelessly that is relied upon by others, leading to their financial loss.

Annullment

A legal procedure that declares a marriage null and void, as if it never legally existed, due to various possible reasons such as fraud or incapacity.