Which of the Following Best Describes a Total Return Swap

question 3

Multiple Choice

Which of the following best describes a total return swap?

• A) It exchanges the realized return on an asset, including both income and capital gains/losses, for a return, equal to LIBOR plus a spread on the initial value of the asset
• B) It exchanges the promised return on an asset, including both income and capital gains/losses, for a return equal to LIBOR plus a spread on the initial value of the asset
• C) It exchanges the realized return on an asset, including income but not capital gains/losses, for a return equal to LIBOR plus a spread on the initial value of the asset
• D) It exchanges the promised return on an asset, including income but not capital gains/losses, for a return equal to LIBOR plus a spread on the initial value of the asset

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Definitions:

Faulty Patterns

Dysfunctional or unproductive behaviors or thoughts that are repeated over time, often leading to negative outcomes.

Insight

Insight is the understanding of a specific cause and effect within a specific context, often leading to a solution to a problem or an understanding of a psychological issue.

Self-Awareness

The realization of one's personal attributes, emotional states, motivations, and wants.

Cognitive Therapies

A category of psychotherapeutic treatments that help patients understand the thoughts and feelings that influence behaviors, aiming to modify dysfunctional thinking patterns.