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Read the following statements and choose the correct option:
Statement 1: The agreement in an OTC derivatives transaction is called a confirm.
Statement 2: swap rate is the average of the all the bid quotes.CorrectIncorrect
Bank X, is an US Bank and Bank Y, is a European Bank. Both have entered into a fixed-fixed currency swap. Bank X has paid principal amount of 150M USD and Y pays 100M Euros to Bank X.
Interest paid by X to Y is 5% and receives 4% annually. Determine value of currency swap for X, which has remaining 2 years. Assuming yields in US & Europe are 2% and 3%. Spot exchange rate is 1.4 USD/ 1 EUR.CorrectIncorrect
A $10 million notional swap that pays floating rate based on 6-month LIBOR and receives 5% fixed rate semi-annually. The swap has a remaining life of 15 months with pay dates as 3,6 & 15 months. Spot LIBOR rates are as follows: 3 months at 5.2%, 9 months at 5.5% and 15 months at 5.8%. LIBOR of last payment was 7%. Calculate value of swap to the fixed rate payer using FRA.CorrectIncorrect
A $10 million notional swap that pays floating rate based on 6-month LIBOR and receives 5% fixed rate semi-annually. The swap has a remaining life of 15 months with pay dates as 3,6 & 15 months. Spot LIBOR rates are as follows: 3 months at 5.2%, 9 months at 5.5% and 15 months at 5.8%. LIBOR of last payment was 7%. Calculate value of swap to the fixed rate payerCorrectIncorrect
Which swaps can have both legs of swap as floating?CorrectIncorrect
Which swaps can be used to convert to transform from fixed/floating to an index-based returns?CorrectIncorrect
Magnitude of potential loss in swaps is ______________ when compared to loss on debt defaults?CorrectIncorrect
Which of the following is inaccurate about currency swaps?CorrectIncorrect
At what rates are swap cash flows discounted?CorrectIncorrect
Swaps are similar to forwards, except?CorrectIncorrect
Company Y has a liability of $800M with a paying term of 20 years and payable yearly. Interest rate on loan is LIBOR+1%. Company wants to bring in certainty in terms of amount to be paid every year and decides to enter into a swap. Which swap could be the best option for this purpose?CorrectIncorrect