Assume the Net Swap Payment Is

question 4

Multiple Choice

Assume the net swap payment is $.50 on a reverse transaction involving a 3-year oat swap.What is the market value of the swap given interest rates on zero coupon treasury bonds are 5.2%,5.6%,and 6.0% for 1,2,and 3 years,respectively?

• A) $0.96
• B) $1.10
• C) $1.25
• D) $1.34

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Definitions:

Held-to-maturity Securities

Debt securities that an investor intends to hold until a fixed maturity date.

Debt Securities

Financial instruments that represent a loan made by an investor to a borrower, typically including terms for interest payments and the return of principal at maturity.

Fixed Maturity

A term related to fixed-income investments indicating the set date when the principal amount of the investment is paid back to the investor.

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks, which provide shareholders with claims on assets and earnings.