Consider a Fixed-For-Floating US Dollar-Korean Won Currency Swap in Which

question 20

Multiple Choice

Consider a fixed-for-floating US dollar-Korean won currency swap in which an investor pays USD floating and receiving KRW fixed. From a cash-flow perspective, the swap is equivalent to a situation in which

• A) The investor has received a KRW fixed-rate loan and made a USD floating-rate loan.
• B) The investor has borrowed floating-rate USD and loaned KRW fixed-rate.
• C) The investor is short a USD floating rate loan and long a KRW fixed-rate borrowing.
• D) The investor has entered into a back-to-back loan agreement with his counterparty with fixed rates on both loans.

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Definitions:

Behavioral Economists

Researchers who study the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.

Minimum Payments

The smallest amount of money that one is required to pay on a debt by a specified due date to avoid defaulting.

Interest Costs

The cost associated with borrowing funds, typically expressed as a percentage of the total amount borrowed.

Self-Interest

That which each firm, property owner, worker, and consumer believes is best for itself and seeks to obtain.