Vidyalelo
Management · Q541

International Finance and Treasury

Graduate and Post Graduate · Management · question 541

Q541

Amount of money involved in swap transaction is classified as

A.
notion principal
Answer
B.
swap principal
C.
transaction principal
D.
time value of swap

Answer: Option A

Solution

Answer: Option A
Solution:
Amount of money involved in swap transaction is classified as notion principal. The notional principal amount, in an interest rate swap, is the predetermined dollar amounts, or principal, on which the exchanged interest payments are based. The notional principal never changes hands in the transaction, which is why it is considered notional, or theoretical.