2 Which of the following is most accurate regarding a plain

2. Which of the following is most accurate regarding a plain vanilla interest rate swap? Select one: a. the swap seller makes a periodic fixed interest rate payment on a stated notional principal amount b. the swap buyer makes a periodic floating-rate interest payments on the same stated notional principal amount c. All of the above are correct d. no principal is exchanged

Solution

In the plain vanilla interest rate swap, one party makes periodic fixed interest rate payments to another party on a notional principal amount and other party pays periodic floating rate interest payments on the same stated notional principal amount. There is no specific buyer or seller in the case of plain vanilla interest rate payment.

However, the notional principal is not exchanged in the plain vanilla swap.

Therefore option (d) is correct.