1.

Which of following describes forward rates?

	A.	Interest rates implied by current zero rates for future periods of time
	B.	Interest rate used when borrowing and lending takes place between banks
	C.	The coupon rate that causes a bond price to equal its par (or principal) value
	D.	A single discount rate that gives the value of a bond equal to its market price when applied to all cash flows

2.

Which of the following describes a 3-month overnight indexed swap (OIS)?

	A.	The geometric average of overnight rates is exchanged for a fixed rate at the end of three months
	B.	LIBOR is exchanged for the overnight rate every day for three months
	C.	The arithmetic average of overnight rates is exchanged for a fixed rate at the end of three months
	D.	A fixed rate is exchanged for the overnight rate every day for three months

3.

Which of the following is true for a currency swap?

	A.	The periodic cash flows throughout a currency swap are not netted as they are in the interest rate swap
	B.	A currency swap can be used to exchange borrowing in one currency for borrowings in another currency
	C.	A currency swap can be used to exchange an investment in one currency for an investment in another currency
	D.	All the choices

4.

Which of the following is NOT true for backwardation?

	A.	The asset underlying the futures contract exhibits negative systematic risk
	B.	The futures price is below the expected future spot price
	C.	For backwardation to occur, there must be a significant benefit to holding the underlying asset of a futures contract
	D.	The futures price is below todays spot price

5.

Which of the following is true for the party paying fixed in a newly negotiated interest rate swap when the yield curve is downward sloping?

	A.	The early forward contracts underlying the swap have a positive value and the later ones have a negative value
	B.	The early forward contracts underlying the swap have a negative value and the later ones have a positive value
	C.	The swap is designed so that all forward rates have zero value
	D.	Sometimes A is true and sometimes B is true