CFA Practice Question

CFA Practice Question

Which of the following is most likely incorrect?
A. An interest rate swap is an agreement between two parties to exchange cash flows from interest-bearing instruments at specified future payment dates.
B. A common interest rate swap is one in which one party pays a fixed rate and the other party pays a floating rate.
C. A bank has made fixed rate loans and believes rates may increase. The bank should enter into the short side of an interest rate swap in which one party pays fixed and the other party pays floating.
Explanation: The short side pays floating and receives fixed, so the bank should enter the long (and not short) side of the swap.

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