Fundamentals of Corporate Finance
Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 23, Problem 10CRCT
Summary Introduction

To discuss: Nature of cash flows when a firm enters into a fixed-for-floating interest rate swap by means of a swap dealer.

Introduction:

Swap contract is an emerging derivative instrument and was first introduced in the year 1981. The swap contract is an agreement to swap or exchange cash flows at the specified intervals. The swap dealer is an important part in the swap market because unlike futures contract, there is no standardized exchange for trading swaps. Hence, a swap dealer is any person who makes the market in swaps.

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