What is a swap?*1 pointa) A contract to exchange currencies at a fixed exchange rateb) A contract to exchange stocks at a predetermined pricec) A contract to exchange assets or liabilities with another partyd) A contract to exchange commodities at a future date
Question
What is a swap?*1 pointa) A contract to exchange currencies at a fixed exchange rateb) A contract to exchange stocks at a predetermined pricec) A contract to exchange assets or liabilities with another partyd) A contract to exchange commodities at a future date
Solution
A swap is c) A contract to exchange assets or liabilities with another party.
In finance, a swap is a derivative contract through which two parties exchange financial instruments. These instruments can be almost anything, but most swaps involve cash flows based on a notional principal amount agreed upon by both parties.
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