An advantage of interest rate swaps is the ability to:
A)swap a fixed loan to a flexible loan.
B)borrow flexible-rate funds,which otherwise would not be available.
C)borrow overseas at a fixed exchange rate.
D)borrow fixed-rate funds,which otherwise would not be available.

Question

Quizplus · Accepted Answer

Interest rate swaps allow borrowers to access funds at a fixed rate, which may not be available in the market. This can be advantageous if the borrower seeks a fixed payment obligation or is looking for protection against interest rate volatility. Option A is incorrect, as interest rate swaps do not allow for a swap from a fixed to flexible loan, but rather allow for swapping from fixed to floating (or vice versa). Option B is incorrect, as interest rate swaps do not provide access to funds that are otherwise unavailable. Option C is incorrect, as interest rate swaps do not involve exchange rate considerations.

An Advantage of Interest Rate Swaps Is the Ability To