The Main Difference Between the "Short-Form" and "Forward" Methods of Pricing

question 26

Multiple Choice

The main difference between the "short-form" and "forward" methods of pricing a floating-rate note is:

• A)The short-form method gives lower prices than the forward method.
• B)The short-form method gives higher prices than the forward method.
• C)The short-form method does not require knowledge of the entire forward term structure of interest rates.
• D)The short-form method does not use the entire forward term structure of interest rates and hence results in less accurate prices.

---

Definitions:

Bilateral CTS

Carpal Tunnel Syndrome affecting both hands, characterized by numbness, tingling, and pain due to median nerve compression.

Spinal Nerves

Nerves that originate from the spinal cord, carrying motor, sensory, and autonomic signals between the spinal cord and the body.

Cerebral Infarction

A type of stroke that occurs when blood flow to part of the brain is blocked, leading to the death of brain tissue.

Carotid Artery

A major artery located on each side of the neck that supplies blood to the brain, neck, and face.