Find the approximate upcoming net payment on an equity swap in which party A pays the return on stock index 1 and party B pays the return on stock index 2. The notional amount is $25 million. Stock index 1 starts the period at 1500 and goes up to 1600 at the end of the period. Stock index 2 starts the period at 3500 and goes up to 3300 at the end of the period.
a. The party paying index 1 pays about $238,000
b. The party paying index 2 pays about $238,000
c. The party paying index 2 pays about $3.095 million
d. The party paying index 1 pays about $25 million
e. The party paying index 1 pays about $3.095 million
Answer: E
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SWAPS
- A basis swap is priced by adding a spread to the higher rate or subtracting a spread from the lower rate. This spread is found as
- Which of the following statements about diff swaps is true?
- Equity swaps can be used for all of the following except:
- Find the net payment on an equity swap in which party A pays the return on a stock index and party B pays a fixed rate of 6 percent. The notional amount is $10 million. The stock index starts off at 1,000 and is at 1,055.15 at the end of the period. The interest payment is calculated based on 180 days in the period and 360 days in the year.
- The combination of a pay euro fixed and receive dollar fixed swap with a pay dollar floating and receive euro fixed results in
- Swap payments typically involve adjusting for the fraction of the year in some fashion. This adjustment is known as
- The value of a pay-fixed, receive-floating interest rate swap is found as the value of a
- The value of a pay-fixed, receive floating interest rate swap is found as the value of a
- Interest rate swaps can be used for all of the following purposes except:
- Equity swaps can be used for all of the following except:
- Which of the following is not a way to terminate a swap:
- Which of the following statements about constant maturity swaps is not true?
- Find the market value of a plain vanilla swap from the perspective of the fixed rate payer in which the upcoming payment is in 30 days, and there is one more payment 180 days after that. The fixed rate is 7 percent and the upcoming floating payment is at 6.5 percent. The notional amount is $15 million. Assume 360 days in a year. The prices of Eurodollar zero coupon bonds are 0.9934 (30 days) and 0.9528 (210 days).
- Find the fixed rate on a plain vanilla interest rate swap with payments every 180 days (assume a 360-day year) for one year. The prices of Eurodollar zero coupon bonds are 0.9756 (180 days) and 0.9434 (360 days).
- Find the upcoming payment interest payments in a currency swap in which party A pays U. S. dollars at a fixed rate of 5 percent on notional amount of $50 million and party B pays Swiss francs at a fixed rate of 4 percent on notional amount of SF35 million. Payments are annual under the assumption of 360 days in a year, and there is no netting.
- Find the upcoming net payment in a plain vanilla interest rate swap in which the fixed party pays 10 percent and the floating rate for the upcoming payment is 9.5 percent. The notional amount is $20 million and payments are based on the assumption of 180 days in the payment period and 360 days in a year.
- Which of the following distinguishes equity swaps from currency swaps?
- A currency swap without the exchange of notional amount is most likely to be used in what situation?
- For a currency swap with $10 million notional amount, the notional amount in British pounds if the exchange rate is $1.55 is (approximately)
- Consider a swap to pay currency A floating and receive currency B floating. What type of swap would be combined with this swap to produce a swap to produce a plain vanilla swap in currency B.
- An interest rate swap with both sides paying a floating rate is called a
- The most basic and common type of swap is called
- The underlying amount of money on which the swap payments are made is called
- Which of the following is not a type of swap?
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