Question
Which of the following statements are true? Select all that apply. A. If you are paying a fixed interest rate and receiving a stock's return
Which of the following statements are true? Select all that apply.
A. If you are paying a fixed interest rate and receiving a stock's return in a swap, and the stock's return is negative, you have to pay more than the interest payment to the other party.
B. Swaps are standardized exchange traded instruments.
C. The value of a swap at initiation is 1.
D. If you are a borrower with a variable interest loan and you are worried about rising interest rates, entering into a plain vanilla swap in which you are paying fixed and receiving floating creates a hedge.
E. Basis spread is the rate differential added to the lower of two floating rates in a swap.
F. The present value of floating rate payments in a swap, at initiation, is always 1.
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