You Have the View That Rates Will Be Rising Over

question 34

Multiple Choice

You have the view that rates will be rising over time.What is thebest kind of swap to exploit this view from among the following alternatives?

• A)Pay fixed,receive floating.
• B)Pay floating,receive fixed.
• C)A maturity-mismatch basis swap in which you pay floating indexed to three-month Libor and receive fixed indexed to six-month Libor.
• D)Pay fixed,receive floating on a reverse-amortization swap.

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Definitions:

Marginal Revenue

The extra revenue generated by the sale of an additional unit of a product or service.

Spot Market

A Spot Market is a public financial market in which financial instruments or commodities are traded for immediate delivery and payment.

Bulk Sale

Involves the wholesale of goods in large quantities, typically at a discounted price.

Perishable Assets

Assets that have a limited timeframe of usability or relevance, beyond which they decline in value or become obsolete.