Consider the image above involving swaps between a commercial bank, a life insurance company and a swap dealer. The letter "A" represents,

Options:

a.	Floating rate cash flows
b.	Fixed rate Cash Flow

The life insurance company will (choose two)

Options:

a.	Pay fixed cash flows to the swap dealer.
b.	Pay floating Cash Flows to the swap dealer.
c.	Receive fixed cash flows from the swap dealer.
d.	Receive floating cash flows from the swap dealer.

The commercial bank will (choose two)

Options:

a.	Pay fixed cash flows to the swap dealer.
b.	Pay floating Cash Flows to the swap dealer.
c.	Receive fixed cash flows from the swap dealer.
d.	Receive floating cash flows from the swap dealer.

Consider the above figure for the questions that follow. It shows. 1. a commercial that pays a variable rate to hold purchase money that supports a long term commercial mortgage portfolio, 2. a life insurance company that owns a variable rate bond portfolio to support life insurance policies, 3. two swaps with a dealer that reduce interest rate risk for both the insurance company and the commercial bank. Cash Flows from Fixed to Floating Interest Rate Swap Commercial Mortgages Fored Indemnity to Policy Holders Swap Dealer Commercial Life Insurance Company > Swap Clearing House Variable Rate Bond Portfolio Purchase Money (Deposits) Life Insurance Company Pays (choose one) Floating (Variable) or Fixed Receives (choose one) Floating (Variable) or Fixed Commercial Bank Pays (choose one) Floating (Variable) or Fixed Receives (choose one) Floating (Variable) or Fixed