A 5-Year Swap Contract Can Be Viewed as a Portfolio

question 42

Multiple Choice

A 5-year swap contract can be viewed as a portfolio of 5 forward contracts with maturities of 1,2,3,4 and 5 years.One important exception is that

• A)the forward price is the same for the swap contract but not for the forward contracts.
• B)the swap contract will have daily resettlement.
• C)the forward contracts will have resettlement risk.
• D)none of the options

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Definitions:

Moderate Length

Refers to something not too long nor too short, typically considered to be of a reasonable or acceptable size or duration.

Complete Answers

Responses or solutions that comprehensively address questions or problems, leaving no aspect unexplored.

Random Assignment

In an experiment, the assignment of participants to experimental conditions on the basis of chance.

Extraneous Variables

Variables that are not the focus of a study but can influence its outcome, potentially confounding the results if not controlled.