By Convention, a Swap Buyer on an Interest Rate Swap

question 30

Multiple Choice

By convention, a swap buyer on an interest rate swap agrees to

• A) periodically pay a fixed rate of interest and receive a floating rate of interest.
• B) periodically pay a floating rate of interest and receive a fixed rate of interest.
• C) swap both principle and interest at contract maturity.
• D) back both sides of the swap agreement.
• E) act as the dealer in the swap agreement.

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Definitions:

Cash Payment

A transaction in which goods or services are paid for with physical currency or through an immediate electronic funds transfer.

Firm's Assets

The economic resources owned by a business, including cash, property, equipment, and intellectual property, which are used to generate revenue.

Stock Split

A business procedure in which a corporation splits its current shares into more shares to increase the shares' marketability.

Round Lot

A standardized number of units of an asset or security, usually used as the normal trading unit in the stock market.