Reading 65: LOS b (part 2) ～ Q1- 5 equivalent, position, simple, style, black

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1.The floating-rate payer in a simple interest-rate swap has a position that is equivalent to:

A)   a series of short FRAs.

B)   a series of long forward rate agreements (FRAs).

C)   issuing a floating-rate bond and a series of long FRAs.

D)   buying a floating-rate bond and a series of short FRAs.

2.Which of the following is equivalent to a pay-fixed swap with a tenor of two years with semi-annual swap payments and a fixed rate of 6 percent (exchanged for LIBOR)? The notional principal is $100,000,000.

A)   A strip of three forward rate agreements, which obligates the party to pay a fixed rate of 6% and receive six-month LIBOR on a notional principal of $100,000,000.

B)   A forward rate agreement, which obligates the party to pay a fixed rate of 6% and receive six-month LIBOR on a notional principal of $100,000,000.

C)   A forward rate agreement, which obligates the party to receive a fixed rate of 6% and pay six-month LIBOR on a notional principal of $100,000,000.

D)   A strip of two forward rate agreements, which obligates the party to pay a fixed rate of 6% and receive six-month LIBOR on a notional principal of $100,000,000.

3.The fixed-rate payer in an interest-rate swap has a position equivalent to a series of:

A)   long interest-puts and short interest-rate calls.

B)   short interest-rate puts and long interest-rate calls.

C)   long interest-rate puts and calls.

D)   short interest-rate calls and puts.

4.The fixed-rate receiver in a plain vanilla interest rate swap has a position equivalent to a series of:

A)   short interest-puts and long interest-rate calls.

B)   long interest-rate puts and short interest-rate calls.

C)   long interest-rate puts.

D)   long interest-rate calls.

5.For a 1-year quarterly-pay swap, an equivalent position with short puts and long calls would involve:

A)   three put-call combinations on the last three settlement dates of the swap.

B)   put-call combinations expiring on each of the four settlement dates.

C)   a put-call combination expiring on the final settlement date of the swap.

D)   three put-call combinations expiring on the first three settlement dates of the swap.