The Advantage of a Rate-Capped Interest Rate Swap (Relative to a Plain

question 34

Multiple Choice

The advantage of a rate-capped interest rate swap (relative to a plain vanilla swap) to a party exchanging floating payments for fixed payments is that

• A)there is a minimum limit set on interest rate payments received.
• B)there is a maximum limit set on the interest payments it will provide.
• C)it receives an up-front fee.
• D)none of the above

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Definitions:

Means

Means refer to the average values of sets of data, calculated by summing all values and dividing by the number of data points.

≠ 0

Symbol indicating that a quantity or difference is not equal to zero, often used in hypotheses testing to signify a non-null effect.

Standard Error

The standard deviation of the sampling distribution of a statistic, often used to estimate the accuracy of sample mean as an approximation of the population mean.

Means

The arithmetic averages of a set of numbers or data points.