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

question 19

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 above.

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Definitions:

Sensory Memory

The shortest-term element of memory, which allows retention of impressions of sensory information after the original stimulus has ceased.

Chunking

A memory strategy that involves grouping or organizing bits of information into larger units, which are easier to remember.

Chunking

A memory strategy that involves organizing information into manageable units or chunks.

Short-Term Memory

The capability to maintain a small volume of information in a condition of ready availability for a short time.