Question

The "comparative advantage" argument for the popularity of interest rate swaps is that poorly rated firms may be pushed to borrowing in the based on the assumption floating rate market while their first choice is fixed.
a) true
b) false

Answer 1

Answer: Option A -- True

Explanation:

Comparative advantage can be defined as acompany which has higher credit rating pays less to raise funds. Therefore, the "comparative advantage" argument for the popularity of interest rate swaps is that poorly rated firms may be pushed to borrowing in the based on the assumption floating rate market while their first choice is fixed is TRUE