In Terms of Valuation, a 12-Year Interest Rate Swap Can

question 55

Multiple Choice

In terms of valuation, a 12-year interest rate swap can be can be considered in terms of

• A)a series of option contracts.
• B)a zero-coupon bond.
• C)a U.S.Treasury STRIP.
• D)bond-equivalent valuation.
• E)securitization of a derivative contract.

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Definitions:

Capital Flight

The massive outflow of financial assets and capital from a country triggered by economic or political unrest.

Loanable Funds

The resources available for borrowing in the financial markets, influenced by savings, borrowing, and the government’s fiscal policies.

Demand For Loanable Funds

The desire to borrow money, driven by (among other factors) investments and the consumer desire for purchasing goods or services on credit.

Open-Economy Macroeconomic Model

A theoretical framework that analyzes the economy of a country in the context of its interactions with other countries, including trade, investment, and financial flows.