Define the basic motivations for a counterparty, Financial Management

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Define the basic motivations for a counterparty to enter into a currency swap.

Answer: One major reason for a counterparty to enter into a currency swap is to exploit the comparative benefit of the other in obtaining debt financing at a lower interest rate than could be acquired on its own. A second major reason is to lock in long-term exchange rates in the repayment of debt service obligations denominated in a foreign currency.

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