A Portfolio Manager Enters into a Total Return Swap

question 18

Multiple Choice

A portfolio manager enters into a total return swap.She swaps 50% of her $50 million index based portfolio for 4.5% yield bonds.If the annualized total return on the index is 2.5%,what net cash flow will the manager experience under the swap agreement?

• A) + $250,000
• B) -$250,000
• C) + $500,000
• D) -$500,000

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Definitions:

Connectionist

relates to a psychological theory which suggests that mental phenomena and processes can be described by artificial neural networks or interconnected systems of simple units.

Traditional Information Processing

Traditional Information Processing views the human mind as a system that processes information through a series of steps, similar to how a computer operates.

Serial Processing

A cognitive process where the brain analyses information in a linear, step-by-step manner, allowing for detailed and accurate analysis of each item in sequence.

Symbol Manipulators

Symbol manipulators, in the context of cognitive science or artificial intelligence, refer to systems or devices that can alter, combine, or use symbols (representations of ideas or objects) to solve problems or perform tasks.