Hull_OFOD9e_MultipleChoice_Questions_Only_Ch07 - Hull...

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Hull: Options, Futures, and Other Derivatives, Ninth Edition Chapter 7: Swaps Multiple Choice Test Bank: Questions 1. A company can invest funds for five years at LIBOR minus 30 basis points. The five-year swap rate is 3%. What fixed rate of interest can the company earn by using the swap? A. 2.4% B. 2.7% C. 3.0% D. 3.3% 2. Which of the following is true? 3. Company X and Company Y have been offered the following rates Fixed Rate Floating Rate Company X 3.5% 3-month LIBOR plus 10bp Company Y 4.5% 3-month LIBOR plus 30 bp Suppose that Company X borrows fixed and company Y borrows floating. If they enter into a swap with each other where the apparent benefits are shared equally, what is company X’s effective borrowing rate? 4. Which of the following describes the five-year swap rate?
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