Question #26
Reading: Reading 30 Pricing and Valuation of Forward Commitments
PDF File: Reading 30 Pricing and Valuation of Forward Commitments.pdf
Page: 12
Status: Unattempted
Correct Answer: A
Question
A plain vanilla interest-rate swap to the fixed-rate payer is equivalent to issuing a fixed-rate bond and:
Answer Choices:
A. buying a floating-rate bond
B. selling a series of interest rate calls
C. selling a series of interest rate puts
Explanation
Paying fixed and receiving floating in a swap is equivalent to issuing a fixed-rate bond and
investing the proceeds in a floating rate bond.