If Short Term Rates Go Up, What Would Happen to the Swap

question 13

Essay

If short term rates go up, what would happen to the swap rate?

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Definitions:

Creditors

Individuals or entities to whom money is owed by another individual or entity, typically due to a loan or credit arrangement.

Bond Discount

The difference between the face value of a bond and its selling price, when the bond is sold for less than its face value.

Straight-Line Method

A depreciation method where an asset's cost is uniformly allocated over its useful life, resulting in equal depreciation expenses each accounting period.

Double-Declining-Balance

An accelerated method of depreciation which doubles the rate at which an asset’s book value depreciates compared to traditional straight-line depreciation, resulting in larger deductions in the early years of an asset’s life.