Which of the following is NOT true about interest rate swaps?
A) Payments are based on a notional principal.
B) Floating rate payers profit if interest rates fall.
C) Payments can be quarterly as well as semi-annually.
D) Parities exchange debt obligations.
E) Default risk is a possibility in the swaps market.

Question

Quizplus · Accepted Answer

Interest rate swaps involve exchanging interest payments based on a notional principal, with one party usually paying a fixed rate and the other party paying a floating rate. Floating rate payers benefit if interest rates fall, and payments can be made quarterly or semi-annually. However, interest rate swaps do not involve the exchange of debt obligations (unlike debt swaps). Default risk is a possibility in the swaps market.

Which of the Following Is NOT True About Interest Rate