Which of the Following Statements About the Swap Transacted Between

question 8

Multiple Choice

Which of the following statements about the swap transacted between Procter & Gamble (P&G) and Bankers Trust (BT) and the developments that followed is INCORRECT?

• A) P&G underestimated the risk of large financial losses that could occur from a special "spread" term embedded in an otherwise innocuous looking fixed-for-floating interest rate swap.
• B) Initially P&G had little chance of winning the lawsuit against BT because caveat emptor or "buyer beware" is a standard warning that applies to all economic activities.
• C) P&G argued before the court that BT was criminally fraudulent in transacting the swap.
• D) P&G alleged that BT did not properly disclose the swap's terms and risks and explain the potential costs of extricating itself from the swap.
• E) BT suffered enormous damage to its reputation and was eventually acquired by the Deutsche Bank.