Question 1:

Which of the following statements are TRUE?

LIBOR is:

Select one or more:

a.A fixed rate of interest rate agreed bilaterally between two banks

b.A variable market rate that reflects the average interest rate that banks will lend to each other for a specified period of time

c.A regulated interest rate set by the International Swaps Dealer Association every 6 months

d.A benchmark interest rate used by parties in a swap contract to determine the amount of the floating rate payments

Question 2:

In a fixed-to-floating interest rate swap, one party agrees to pay to another party cash flows equal to a fixed interest on a notional principal, and the other party agrees to pay a variable rate on the notional principal equal to a fixed margin relative to LIBOR for a predetermined number of years. In a currency swap, the principal is specified in each of two currencies and the principal amounts are exchanged at the beginning and at the end of the swap.

Select one:

True

False

Question 3.

Which of the following statements is TRUE?

Interest rate swaps can be used to:

Select one:

a.Convert floating rate investments to fixed rate investments

b.Convert floating rate debt to fixed rate debt

c.Adjust interest rate risk arising in a project or across a business by matching the interest rate sensitivity of interest earned with interest payable

d.All of the above