To determine the fixed rate on a swap, you would (Points : 1)

use put-call parity price it as the issuance of a fixed rate bond and purchase of a floating rate bond or vice versa use the same fixed rate as that of a zero coupon bond of equivalent maturity use the continuously compounded rate for the shortest maturity bond none of the above

Question 29.29. Which of the following is not a type of swap? (Points : 1)

settlement swaps commodity swaps interest rate swaps equity swaps currency swaps

Question 30.30. The underlying amount of money on which the swap payments are made is called (Points : 1)

settlement value market value notional principal base value equity value

Question 31.31. The most basic and common type of swap is called (Points : 1)

basis swap plain vanilla swap plain paper swap commercial swap bond swap

Question 32.32. An interest rate swap with both sides paying a floating rate is called a (Points : 1)

plain vanilla swap two-way swap floating swap spread swap basis swap

Question 33.33. Consider a swap to pay currency A floating and receive currency B floating. What type of swap would be combined with this swap to produce a swap to produce a plain vanilla swap in currency B. (Points : 1)

pay currency B floating, receive currency A fixed pay currency B fixed, receive currency A floating pay currency B fixed, receive currency A fixed pay currency B floating, receive currency A floating none of the above

Question 34.34. For a currency swap with $10 million notional principal, the notional principal in British pounds if the exchange rate is $1.55 is (approximately) (Points : 1)

11.55 million 15.5 million 10 million 6.45 million none of the above

Question 35.35. A currency swap without the exchange of notional principal is most likely to be used in what situation? (Points : 1)

a company issuing a bond a company generating cash flows in a foreign currency a company arranging a loan a dealer trying to hedge a currency option none of the above

Question 36.36. Which of the following distinguishes equity swaps from currency swaps? (Points : 1)

equity swap payments are always hedged equity swap payments are made on the first day of the month equity swap payments can be negative equity swap payments have more credit risk none of the above

Question 37.37. Find the upcoming net payment in a plain vanilla interest rate swap in which the fixed party pays 10 percent and the floating rate for the upcoming payment is 9.5 percent. The notional principal is $20 million and payments are based on the assumption of 180 days in the payment period and 360 days in a year. (Points : 1)

fixed payer pays $1,950,000 fixed payer pays $950,000 floating payer pays $1 million floating payer pays $50,000 fixed payer pays $50,000

Question 38.38. Find the upcoming payment interest payments in a currency swap in which party A pays U. S. dollars at a fixed rate of 5 percent on notional principal of $50 million and party B pays Swiss francs at a fixed rate of 4 percent on notional principal of SF35 million. Payments are annual under the assumption of 360 days in a year, and there is no netting. (Points : 1)

party A pays $2,500,000, and party B pays SF1,400,000 party A pays SF1,400,000, and party B pays $2,500,000 party A pays SF1,750,000, and party B pays SF1,400,000 party A pays $2,500,000, and party B pays $2,000,000 party A pays $50 million, and party B pays SF35 million

Question 39.39. Find the net payment on an equity swap in which party A pays the return on a stock index and party B pays a fixed rate of 6 percent. The notional principal is $10 million. The stock index starts off at 1,000 and is at 1,055.15 at the end of the period. The interest payment is calculated based on 180 days in the period and 360 days in the year. (Points : 1)

party B pays $851,500 parry B pays $48,500 party B pays $251,500 party A pays $251,500 party A pays $851,500

Question 40.40. Find the approximate upcoming net payment on an equity swap in which party A pays the return on stock index 1 and party B pays the return on stock index 2. The notional principal is $25 million. Stock index 1 starts the period at 1500 and goes up to 1600 at the end of the period. Stock index 2 starts the period at 3500 and goes up to 3300 at the end of the period. (Points : 1)

The party paying index 1 pays about $238,000 The party paying index 2 pays about $238,000 The party paying index 2 pays about $3.095 million The party paying index 1 pays about $25 million The party paying index 1 pays about $3.095 million

Question 41.41. Find the fixed rate on a plain vanilla interest rate swap with payments every 180 days (assume a 360-day year) for one year. The prices of Eurodollar zero coupon bonds are 0.9756 (180 days) and 0.9434 (360 days). (Points : 1)

5.9 percent 5 percent 6 percent 5.5 percent 2.95 percent

Question 42.42. Use the information in problem 40 to find the fixed rate on an equity swap in which the stock index is at 2,000. (Points : 1)

2.95 percent 5 percent 6 percent 5.9 percent 3.5 percent

Question 43.43. Find the market value of a plain vanilla swap from the perspective of the fixed rate payer in which the upcoming payment is in 30 days, and there is one more payment 180 days after that. The fixed rate is 7 percent and the upcoming floating payment is at 6.5 percent. The notional principal is $15 million. Assume 360 days in a year. The prices of Eurodollar zero coupon bonds are 0.9934 (30 days) and 0.9528 (210 days). (Points : 1)

the fixed payer pays $31,763.75 the fixed payer pays $71,527.50 the floating payer pays $49,500 the floating payer pays $194,228 none of the above

Question 44.44. Which of the following statements about constant maturity swaps is not true? (Points : 1)

the CMT rate is linked to a U. S. treasury security of equivalent maturity the typical maturity is 2 to 5 years the maturity is constant one rate is based on a security of a longer rate than the settlement period the swap is a type of interest rate swap

Question 45.45. Which of the following is not a way to terminate a swap: (Points : 1)

the two counterparties cash settle the market value enter into an opposite swap with another counterparty hold the swap to its maturity date use a forward contract or option on the swap to enter into an offsetting swap borrow the notional principal and pay off the counterparty

Question 46.46. An equity swap with fixed interest payments has two payments remaining. The first occurs in 30 days and the second occurs in 210 days. The discount factors are 0.9934 (30 days) and 0.9528 (210 days). The upcoming fixed payment is at 4 percent and is based 180 days in a 360-day year. The equity index was at 1150 at the beginning of the period and is now at 1152.75. The notional principal is $60 million. Find the approximate value of the equity swap from the perspective of the party making the equity payment and receiving the fixed payment. (Points : 1)

$143,478 $642,000 -$143,478 -$642,000 -$496,560

Question 47.47. The present value of the series of dollar payments in a currency swap per $1 notional principal is $0.03. The present value of the series of euro payments in the same currency swap per 1 is 0.0225. The current exchange rate is $1.05 per euro. If the swap has a notional principal of $100 million and 105 million, find the market value of the swap from the perspective of the party paying euros and receiving dollars. (Points : 1)

$519,375 -$2,480,625 $3,000,000 -$3,000,000 -$519,375

Question 48.48. Equity swaps can be used for all of the following except: (Points : 1)

to synthetically buy stock to synthetically sell stock to convert dividends into capital gains to synthetically re-align an equity portfolio none of the above