Hull:Options,Futures,andOtherDerivatives,NinthEditionChapter7:SwapsMultipleChoiceTestBank:Questions1.AcompanycaninvestfundsforfiveyearsatLIBORminus30basispoints.Thefive-yearswaprateis3%.Whatfixedrateofinterestcanthecompanyearnbyusingtheswap?A.2.4%B.2.7%C.3.0%D.3.3%2.Whichofthefollowingistrue?A.PrincipalsarenotusuallyexchangedinacurrencyswapB.Theprincipalamountsusuallyflowintheoppositedirectiontointerestpaymentsatthebeginningofacurrencyswapandinthesamedirectionasinterestpaymentsattheendoftheswap.C.Theprincipalamountsusuallyflowinthesamedirectionasinterestpaymentsatthebeginningofacurrencyswapandintheoppositedirectiontointerestpaymentsattheendoftheswap.D.Principalsarenotusuallyspecifiedinacurrencyswap3.CompanyXandCompanyYhavebeenofferedthefollowingratesFixedRateFloatingRateCompanyX3.5%3-monthLIBORplus10bpCompanyY4.5%3-monthLIBORplus30bpSupposethatCompanyXborrowsfixedandcompanyYborrowsfloating.Iftheyenterintoaswapwitheachotherwheretheapparentbenefitsaresharedequally,whatiscompanyX’seffectiveborrowingrate?A.3-monthLIBOR−30bpB.3.1%C.3-monthLIBOR−10bpD.3.3%4.Whichofthefollowingdescribesthefive-yearswaprate?A.ThefixedrateofinterestwhichaswapmarketmakerispreparedtopayinexchangeforLIBORona5-yearswapB.ThefixedrateofinterestwhichaswapmarketmakerispreparedtoreceiveinexchangeforLIBORona5-yearswapC.TheaverageofAandBD.ThehigherofAandB5.Whichofthefollowingisauseofacurrencyswap?A.ToexchangeaninvestmentinonecurrencyforaninvestmentinanothercurrencyB.ToexchangeborrowinginonecurrencyforborrowingsinanothercurrencyC.TotakeadvantagesituationswherethetaxratesintwocountriesaredifferentD.Alloftheabove6.ThereferenceentityinacreditdefaultswapisA.ThebuyerofprotectionB.ThesellerofprotectionC.ThecompanyorcountrywhosedefaultisbeinginsuredagainstD.Noneoftheabove7.Whichofthefollowingdescribesaninterestrateswap?A.TheexchangeofafixedratebondforafloatingratebondB.AportfolioofforwardrateagreementsC.AnagreementtoexchangeinterestatafixedrateforinterestatafloatingrateD.Alloftheabove8.Whichofthefollowin...
