Consider a Situation Where the Duration of the Fixed Portion

question 19

Multiple Choice

Consider a situation where the duration of the fixed portion of a swap is greater than the floating portion of a swap.Which of the following statements is most correct?

• A)The fixed-rate payers gain when rates fall.
• B)The market value of fixed-rate payments will decrease by more than the market value of floating-rate payments when interest rates fall.
• C)The market value of fixed-rate payments will decrease by more than the market value of floating-rate payments when interest rates rise.
• D)The floating-rate payers gain when rates rise.
• E)The market value of the swap will increase with an increase in interest rates.

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Definitions:

Inferential Statistics

A branch of statistics that allows us to make predictions or inferences about a population based on a sample of data.

Characteristics

Characteristics are distinguishing traits, qualities, or properties that identify and differentiate individuals, groups, or things.

Central Tendency

A statistical measure that identifies a single value as representative of an entire distribution of data, commonly using the mean, median, or mode.

Measures

Quantitative or qualitative tools used to assess, evaluate, or quantify variables of interest in research, testing, and evaluation.