Multiple choice

Currency Swap is an instrument to manage

  1. currency risk

  2. interest rate risk

  3. currency and interest rate risk

  4. cash flows in different currencies

  5. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A currency swap is an agreement to exchange principal and interest payments in one currency for principal and interest payments in another currency. It is primarily used to manage cash flows in different currencies, though it also helps manage currency risk. Options A and B are incomplete, while option C is partially correct but option D most accurately captures the primary purpose.

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