An Amortizing Interest-Rate Swap Is One in Which

question 3

Multiple Choice

An amortizing interest-rate swap is one in which

• A) The fixed interest rate in the swap declines in a specified manner over the life of the swap.
• B) The floating interest rate in the swap declines in a specified manner over the life of the swap.
• C) The notional principal amount in the swap declines in a specified manner over the life of the swap.
• D) The time-period between payments in the swap gets shorter in a specified manner.

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Definitions:

Violates WARP

Refers to a situation where an individual's choice behavior contradicts the Weak Axiom of Revealed Preferences, suggesting inconsistency in their preferences.

Bundle

A combination of goods or services that are sold or consumed together.

Revealed Preferred

Another term for revealed preference, emphasizing the process of deducing preferences by observing actual choices under constraints.

Violates WARP

Deviating from the Weak Axiom of Revealed Preference, indicating inconsistencies in consumer choice under the assumption of rational behavior.