In a currency swap,
A)it may be the case that two counterparties have equivalent credit ratings.
B)it may be the case that firms have a comparative advantage in borrowing in their domestic markets.
C)it may be the case that two counterparties have equivalent credit ratings,and it may also be the case that firms have a comparative advantage in borrowing in their domestic markets.
D)none of the options

Question

Quizplus · Accepted Answer

It is possible for two counterparties to have equivalent credit ratings, which would make a currency swap mutually beneficial. Additionally, it is common for firms to have a comparative advantage in borrowing in their domestic markets, which also makes a currency swap a useful financing tool. Therefore, both options A and B are correct, making option C the best choice. Option D is incorrect as there are correct choices within the question.

In a Currency Swap