Consider a Situation Where the Duration of the Fixed Portion

question 19

Multiple Choice

Consider a situation where the duration of the fixed portion of a swap is greater than the floating portion of a swap.Which of the following statements is most correct?

• A)The fixed-rate payers gain when rates fall.
• B)The market value of fixed-rate payments will decrease by more than the market value of floating-rate payments when interest rates fall.
• C)The market value of fixed-rate payments will decrease by more than the market value of floating-rate payments when interest rates rise.
• D)The floating-rate payers gain when rates rise.
• E)The market value of the swap will increase with an increase in interest rates.

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Definitions:

Checkable Deposits

Bank account balances that can be accessed using checks, debit cards, or electronic means to make payments directly.

United Bank

A generic term that may refer to any bank operating under the name "United Bank" in various parts of the world.

Excess Reserves

The reserves held by banks over and above the minimum required by the central bank, available for lending or investment.

Money Supply

The total financial resources existing in an economy at a certain time.