Question
Question 1 A swap in which fund manager receives a floating rate in exchange for the payments on bonds the fund continues to hold is
Question 1 |
A swap in which fund manager receives a floating rate in exchange for the payments on bonds the fund continues to hold is called _____________.
Question options:
an alpha-porting swap | |
an asset swap | |
a deferred swap | |
a future overlay swap |
Question 7 |
Which of the following is NOT true?
Question options:
A fund manager might own fixed-rate bonds and wish to have floating-rate exposure while continuing to own the bonds. A swap in which fund manager receives a floating rate in exchange for the payments on bonds the fund continues to hold is called an asset swap. | |
Interest rate swaps permit firms to separate credit risk and interest rate risk. | |
A swap is a contract calling for an exchange of payments, on one or more dates, determined by the difference in two prices. | |
A set of swap rates at different maturities is called the swap tenor. |
Question 8 |
Apple Inc. and Microsoft Inc. decide to swap $1 million loans. Apple Inc. currently pays 12.0% fixed and Microsoft Inc. pays 10.2% on a LIBOR + 0.8% loan. What is the net cash flow for Apple if they swap their fixed loan for a LIBOR + 0.8% loan and LIBOR rises to 11.2%? (Hint: The net swap payment is calculated as: Interest payment received from the swap transaction - the interest payment paid from the swap transaction. The interest payment is calculated as the notional swap principal here is $1 million x the interest rate.)
Question options:
0 | |
-$18,000 | |
$18,000 | |
+$10,000 | |
-$10,000 |
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