A Variable Notional Equity Swap Differs from a Fixed Notional

question 12

Multiple Choice

A variable notional equity swap differs from a fixed notional equity swap in that

• A)The variable notional swap involves a principal that,like an amortizing swap,decreases from period to period in a predetermined manner.
• B)The variable notional swap involves a principal that changes from period to period depending on realized returns on the underlying equity or equity index.
• C)The variable notional swap involves a principal that changes from period to period depending on realized Libor rates during the receding period.
• D)In a variable notional swap,the receiver of equity returns can choose whether to pay Libor or the returns on a specified broad market index on each payment date.

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