Which of the following statements is correct for an interest rate swap?
A) There is an exchange on principal between counterparties.
B) There is no exchange of principal between counterparties.
C) There is an exchange of currencies between counterparties.
D) There is no exchange of cash between counterparties.

Question

Quizplus · Accepted Answer

In an interest rate swap, there is no exchange of principal between counterparties. The swap involves exchanging fixed and floating interest rate payments based on a notional principal amount. There may be exchanges of cash based on the difference between the fixed and floating rates, but there is no exchange of principal.

Which of the Following Statements Is Correct for an Interest