Interest rate swaps are intended to:
A) decrease the interest rate risk of the firms involved
B) decrease the credit risk of the firms involved
C) decrease the market risk of the firms involved
D) decrease the liquidity risk of the firms involved

Question

Quizplus · Accepted Answer

Interest rate swaps are financial instruments used by firms to manage or hedge against interest rate risk. By exchanging fixed-rate interest payments for floating-rate payments, or vice versa, firms can align their interest payment obligations with their expectations of future interest rate movements, thereby decreasing their exposure to fluctuations in interest rates.

Interest Rate Swaps Are Intended To