In a Swap Arrangement, the Most Common Index Used for Floating-Rate

question 16

Multiple Choice

In a swap arrangement, the most common index used for floating-rate payments is the

• A)coupon rate on existing bonds.
• B)stock dividend rate based on a U.S. stock index.
• C)London Interbank Offer Rate (LIBOR).
• D)Treasury bond yield.

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Definitions:

Average Total Cost

This refers to the total cost of production divided by the number of units produced, inclusive of fixed and variable costs.

Marginal Cost

The cost incurred by producing one additional unit of a good or service.

Opportunity Cost

Opportunity cost represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Marginal Product

Describes the additional output that is produced by using one more unit of a factor of production, holding all other factors constant.