One advantage of using swaps to eliminate interest-rate risk is that swaps
A) are less costly than futures.
B) are less costly than rearranging balance sheets.
C) are more liquid than futures.
D) have better accounting treatment than options.

Question

Quizplus · Accepted Answer

Swaps are less costly than rearranging balance sheets, as swaps involve entering into an agreement with another party to exchange the interest payments on a notional principal amount, rather than actually buying or selling assets. This can be a more cost-effective way to manage interest rate risk compared to rearranging balance sheets or using other financial instruments.

One Advantage of Using Swaps to Eliminate Interest-Rate Risk Is