A Variable Notional Equity Swap Differs from a Fixed Notional

question 10

Multiple Choice

A variable notional equity swap differs from a fixed notional equity swap in that

• A) The variable notional swap involves a principal that, like an amortizing swap, decreases from period to period in a predetermined manner.
• B) The variable notional swap involves a principal that changes from period to period depending on realized returns on the underlying equity or equity index.
• C) The variable notional swap involves a principal that changes from period to period depending on realized Libor rates during the receding period.
• D) In a variable notional swap, the receiver of equity returns can choose whether to pay Libor or the returns on a specified broad market index on each payment date.

---

Definitions:

Jung

Refers to Carl Jung, a Swiss psychiatrist and psychoanalyst who founded analytical psychology and introduced concepts like archetypes and the collective unconscious.

Denial

A psychological defense mechanism where an individual refuses to accept reality or facts, thus avoiding a psychologically uncomfortable truth.

Terminal Illness

A terminal illness is a disease or condition that is considered incurable and is likely to lead to death.

Credible Evidence

Information or testimony that is believable and reliable, often used in the context of legal proceedings or scientific research.