An interest rate swap in which the notional principal declines over time is called a/an:
A) amortised swap.
B) term swap.
C) zero-coupon swap.
D) none of the given choices.

Question

Quizplus · Accepted Answer

In an amortised swap, the notional principal declines over time. This means that the amount on which the interest payments are based decreases at regular intervals. This can be useful for parties who want to limit their exposure to a particular market or investment. For example, a company may use an amortised swap to gradually reduce their exposure to a specific currency or interest rate. Therefore, A) Amortized swap is the best choice.

An Interest Rate Swap in Which the Notional Principal Declines