The Option on a Callable Swap Would Most Likely Be

question 50

Multiple Choice

The option on a callable swap would most likely be exercised if interest rates

• A)rise.
• B)fall.
• C)remain constant.
• D)remain somewhat stable.

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Definitions:

Prolonged Inflation

An extended period of time during which prices in an economy consistently rise, diminishing purchasing power.

Monetarist

An economist who believes that variations in the money supply have major influences on national output in the short run and the price level over longer periods.

Keynesian

An economic theory suggesting that increased government expenditures and lower taxes can stimulate demand and pull the global economy out of a recession.

Rational Expectations

An economic theory that proposes people make choices based on rational judgements, accessible information, and previous experiences.