How does an interest rate swap work? In particular, what is the notional principal?
What will be an ideal response?
An interest rate swap is an agreement between counterparties that allows an MNC to change the nature of its debt from a fixed interest rate to a floating interest rate or from a floating interest rate to a fixed interest rate. One counterparty to the basic interest rate swap pays a fixed amount of interest on a notional principal to the other counterparty, which in turn is paying the floating interest rate cash flows on the same notional amount to the first counterparty. The term notional indicates the basic principal amount on which the cash flows of the interest rate swap depend. Unlike a currency swap, no exchange of principal is necessary because the principal is an equal amount of the same currency. Usually, only a net interest payment is made depending upon whether the fixed interest rate stated in the swap is higher or lower than the floating interest rate.
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According to Michael Porter, what are three effective competitive positioning strategies?
A) middle-of-the-roaders, focus, and overall cost leadership B) focus, differentiation, and middle-of-the-roaders C) overall cost leadership, differentiation, and middle-of-the-roaders D) overall cost leadership, differentiation, and focus E) differentiation, market segmentation, and focus
Which of the following statements is FALSE if you increase your monthly payment above the required loan payment?
A) The extra portion of the payment goes to the principal. B) You can significantly decrease the number of payments needed to pay off the loan. C) The extra portion of the payment increases the principal. D) Besides lowering the principal, you can significantly reduce the number of payments needed to pay off the loan.