In a Plain Vanilla Fixed-For-Floating Swap

question 16

Multiple Choice

In a plain vanilla fixed-for-floating swap,

• A)Fixed payments and floating payments must be made on the same date.
• B)Fixed payments and floating payments may follow different payment cycles.
• C)Fixed payments are made semi-annually while floating payments are quarterly.
• D)Fixed payments are known ahead of time while the floating payment due on a particular date gets to be known only on that date.

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Definitions:

Marginal Costs

The additional cost incurred to produce one more unit of a good or service.

Competitive Market

A market structure characterized by a large number of sellers and buyers, where no single entity has the power to significantly influence prices or market conditions.

Marginal Revenue

The additional income received from selling one more unit of a product or service.

Average Variable Costs

The total variable costs of production divided by the quantity of output produced, indicating the cost of producing each unit.