PT Ch30

PT Ch30 - Exam Name_ MULTIPLE CHOICE. Choose the one...

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Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose that for the next five years party X agrees to pay party Y 10% per year, while party Y agrees to pay party X six - month LIBOR (London Interbank Offered Rate). Party X is a fixed - rate payer / ________, while party Y is a floating - rate payer / ________. 1) A) floating - rate receiver; floating - rate receiver. B) floating - rate receiver; fixed - rate receiver. C) fixed - rate receiver; fixed - rate receiver. D) floating - rate payer; fixed - rate payer. 2) The ________ is the value of the reference rate at the FRA's settlement date. 2) A) contract rate B) going rate C) notional rate D) settlement rate 3) In a ________, the party that wants out of the transaction will arrange for an additional swap in which (1) the maturity on the new swap is equal to the time remaining of the original swap, (2) the reference rate is the same, and (3) the notional principal amount is the same. 3) A) swap reversal B) swap sale C) swap buy - back D) close - out 4) Assume the following terms for an FRA: Reference rate is three - month LIBOR, the contract rate is 5.5%, the notional amount is for $10 million, and the number of days to settlement is 91 days. If the settlement rate is 6.25%, what is interest differential? 4) A) $17,489 B) $18,958 C) $18,531 D) $18,168 5) While an interest rate swap may be nothing more than a package of forward contracts, several important reasons suggest that it is not a redundant contract. Which of the below is NOT one of these? 5) A) Forward contract are a more transactionally efficient instrument since their beginning in 1955. B) The longest maturity of forward or futures contracts does not extend out as far as that of an interest rate swap. C) An interest rate swap is a more transactionally efficient instrument. D) The liquidity of the interest rate swap market has grown since its beginning in 1981. 6) Which of the below statements is TRUE? 6) A) There are three general types of transactions in the secondary market for swaps. These include (1) a swap reversal, (2) a swap sale (or assignment), and (3) a swap buy - back (or close - out or cancellation). B) Given that a swap is not a package of futures/forward contracts, the shorter - term swap spreads respond directly to fluctuations in Eurodollar CD futures prices. C) The convention that has evolved for quoting swaps levels is for a swap dealer to set the floating rate greater than the index and then quote the fixed rate that will apply. D) The swap spread is determined by different factors than what drive the spread over Treasuries on instruments that replicate a swap's cash flows. 1
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PT Ch30 - Exam Name_ MULTIPLE CHOICE. Choose the one...

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