The Swap Rate in a Plain Vanilla Swap

question 26

Multiple Choice

The swap rate in a plain vanilla swap:

• A)is the rate paid by the floating-rate payer
• B)may require interest payments in a foreign currency
• C)is an exact average of the forward rates
• D)is a multi-period fixed rate
• E)is set at the commencement of each swap period.

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Definitions:

Anvil

A heavy iron block typically used in metalworking upon which metal can be hammered and shaped.

Stirrup

A small U-shaped bone in the middle ear that transmits sound vibrations from the anvil to the cochlea. Alternatively, it refers to a device attached to the saddle in horse riding, supporting the rider's foot.

Frequency Theory

A theory in hearing that suggests the perception of pitch is related to the rate at which the entire basilar membrane vibrates, indicating that the frequency of the sound wave is mimicked by the firing rate of the auditory nerve.

Basilar Membrane

A structure in the cochlea of the inner ear that plays a critical role in sound perception, vibrating in response to sound and contributing to the separation of different frequencies for auditory processing.