Which of the following accurately describes the key difference between Forward Rate Agreements (FRAs) and Interest Rate Swaps (IRS)?
1
FRAs are over-the-counter contracts, whereas IRS are traded on exchanges.
2
FRAs involve the exchange of interest payments, while IRS involve the exchange of principal amounts.
3
FRAs fix the interest rate for a future period, while IRS involve the exchange of fixed and floating interest rate payments over multiple periods.
4
FRAs are used primarily for currency hedging, whereas IRS are used for interest rate risk management.
5
FRAs are typically short-term contracts, while IRS are long-term contracts.