For the Counterparties of an Interest-Rate Swap to Determine the Amount

question 91

Multiple Choice

For the counterparties of an interest-rate swap to determine the amount and timing of thepayments they need to make to each other, they must specify

• A) the spread, type of interest rate, risk tolerance and maturity date
• B) the notional amount, type of interest rate, start date and maturity date
• C) the notional amount, spread, risk tolerance and maturity date
• D) the type of interest rate, spread, start date and maturity date

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Definitions:

Horizontal Axis

The x-axis in a graph, typically representing the independent variable or the quantity of interest.

Production Possibilities

A theoretical model depicting the various combinations of goods and services an economy can produce, given its available resources and technology.

Capital Goods

Capital goods are tangible assets such as buildings, machinery, and equipment that a business uses to produce goods or services.

Marginal Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen, especially in the context of resource allocation.