2728

Firm A has a funding objective for fixed-rate debt, and Firm B has a funding objective for floating-rate debt. An interest rate swap between these two parties could be arranged such that it is mutually advantageous when which of the following is true? O The parties to the swap are a financial and non-financial firm The parties desire the type of financing that is relatively worse for them O At least one of the firms is unable to obtain loan approval from traditional lending providers (banks) One party has both higher fixed and floating rates compared to the other party The parties desire the type of financing that is relatively better for them Which statement regarding DURATION is false? O For corporate bonds, duration can never exceed maturity Consider a simple interest loan and bond equal in maturity and required yield. The bond will generally have more interest rate risk than the loan. O The change in price predicted by Macaulay's Duration is less correct when the change in interest rates is greater. O A bank has no interest rate risk when the duration of its assets equals the duration of its liabilities. O Duration equals maturity for zero-coupon bonds