You Are the Fixed-Rate Payer in a Plain Vanilla Interest

question 499

Multiple Choice

You are the fixed-rate payer in a plain vanilla interest rate swap. If your counterparty defaults, your exposure at default is:

• A) greater, the higher the market swap rate and the shorter the term
• B) lower, the lower the market swap rate and the shorter the term
• C) lower, the lower the market swap rate and the longer the term
• D) greater, the higher the market swap rate and the longer the term

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Definitions:

Insurance In Transit

Coverage that protects goods from loss or damage while they are being transported from one place to another.

FOB Shipping Point

A term used in shipping indicating that the buyer assumes responsibility for the goods and shipping costs the moment the goods leave the seller's premises.

Merchandise Inventory

Goods and products that a firm holds with the intent to sell them as part of its business operations; considered a current asset on the balance sheet.

Perpetual Inventory System

A method for accounting inventory that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.