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:

Operating Income

Earnings generated from a company's core business operations, excluding deductions of interest and taxes.

Credit Sales

Transactions where goods are sold and payment is received at a later date, extending credit to the buyer.

Gain from Sale

The profit realized from the sale of assets or investments when the selling price exceeds the original purchase price.

Operating Income

The profit earned from a firm's core business operations, excluding deductions of interest and taxes.