1．Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5 percent and a floating rate of 90-day London Interbank Offered Rate (LIBOR) plus 150 basis points. 90-day LIBOR is currently 3 percent and the current forward rates for the next four quarters are 3.2 percent, 3.6 percent, 3.8 percent, and 4 percent. If these rates are actually realized, at the termination of the swap the floating-rate payer will:

A)   pay $10,020,000.

B)   pay $25,000.

C)   receive $12,500.

D)   pay $20,000.

2．Consider a swap with a notional principal of $300 million, annual payments, and a 30E/360 daycount convention (every month has 30 days, a year has 360 days).

Given the above diagram, which of the following statements is TRUE?  At time period 2:

A)   A pays B $1.5 million.

B)   B pays A $1.5 million.

C)   A pays B $6.5 million and B pays A $7 million.

D)   B pays A $21.0 million.

3．Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5 percent and a floating rate of 90-day London Interbank Offered Rate (LIBOR) plus 150 basis points. 90-day LIBOR is currently 3 percent and the current forward rates for the next four quarters are 3.2 percent, 3.6 percent, 3.8 percent, and 4 percent. If these rates are actually realized, at the first quarterly settlement date:

A)   the fixed-rate payer will be required to make a payment of $7,500.

B)   no payments will be made.

C)   the floating rate payer will be required to make a payment of $92,500.

D)   the fixed rate payer will be required to make a payment of $30,000.

4．Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5 percent and a floating rate of 90-day London Interbank Offered Rate (LIBOR) plus 150 basis points. 90-day LIBOR is currently 3 percent and the current forward rates for the next four quarters are 3.2 percent, 3.6 percent, 3.8 percent, and 4 percent. If these rates are actually realized, at the second quarterly settlement date, the fixed-rate payer in the swap will:

A)   receive a payment of $10,000.

B)   receive a payment of $5,000.

C)   neither make nor receive a payment.

D)   be required to pay $117,500.

5．Which of the following statements is TRUE concerning the above diagram? Counterparty:

A)   B will gain in the swap when interest rates increase.

B)   A will gain in the swap when interest rates increase.

C)   B receives a variable rate from counterparty A.

D)   B pays a fixed rate to counterparty A.

6.Which term does NOT apply to interest rate swaps?

A)   Trading exchange.

B)   Time to maturity.

C)   Settlement frequency.

D)   Notional principal amount.

7.Which of the following statements about swaps is FALSE?

A)   In an interest rate swap, only the net interest payments are made.

B)   In a currency swap, the notational principal is actually swapped twice, once at the beginning of the swap and again at the termination of the swap.

C)   In an interest rate swap, the pay-fixed party makes a sequence of fixed rate interest payments and receives a sequence of floating rate interest payments.

D)   In a currency swap, only net interest payments are made.

答案和详解如下：

1．Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5 percent and a floating rate of 90-day London Interbank Offered Rate (LIBOR) plus 150 basis points. 90-day LIBOR is currently 3 percent and the current forward rates for the next four quarters are 3.2 percent, 3.6 percent, 3.8 percent, and 4 percent. If these rates are actually realized, at the termination of the swap the floating-rate payer will:

A)   pay $10,020,000.

B)   pay $25,000.

C)   receive $12,500.

D)   pay $20,000.

The correct answer was D)    

The payment at the fourth (final) settlement date will be based on the realized LIBOR at the third quarter, 3.8%. The net payment by the floating rate payer will be:

(0.038 + 0.015 - 0.045) × 90/360 × 10,000,000 = $20,000

2．Consider a swap with a notional principal of $300 million, annual payments, and a 30E/360 daycount convention (every month has 30 days, a year has 360 days).

	LIBOR
Counterparty	▬▬▬▬▬▬▬▬▬▬►	Counterparty
A	◄▬▬▬▬▬▬▬▬▬▬	B
	7% Fixed

0		1		2
LIBOR = 5.5%		LIBOR = 6.5%		LIBOR = 7%

Given the above diagram, which of the following statements is TRUE?  At time period 2:

A)   A pays B $1.5 million.

B)   B pays A $1.5 million.

C)   A pays B $6.5 million and B pays A $7 million.

D)   B pays A $21.0 million.

The correct answer was B)

The variable rate to be used at time period 2 is set at time period 1 (the arrears method). Therefore, the appropriate variable rate is 6.5 percent, the fixed rate is 7 percent, and the interest payments are netted. The fixed-rate payer, counterparty B, pays according to:
[Swap Fixed Rate – LIBORt-1][(# of days)/(360)][Notional Principal]. In this case, we have [0.07 – 0.065][360/360][$300 million] = 1.5 million.

3．Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5 percent and a floating rate of 90-day London Interbank Offered Rate (LIBOR) plus 150 basis points. 90-day LIBOR is currently 3 percent and the current forward rates for the next four quarters are 3.2 percent, 3.6 percent, 3.8 percent, and 4 percent. If these rates are actually realized, at the first quarterly settlement date:

A)   the fixed-rate payer will be required to make a payment of $7,500.

B)   no payments will be made.

C)   the floating rate payer will be required to make a payment of $92,500.

D)   the fixed rate payer will be required to make a payment of $30,000.

The correct answer was B)    

The first floating rate payment is based on current LIBOR + 1.5% = 4.5%. This is equal to the fixed rate so no (net) payment will be made on the first settlement date.

4．Consider a $10,000,000 1-year quarterly-pay swap with a fixed rate of 4.5 percent and a floating rate of 90-day London Interbank Offered Rate (LIBOR) plus 150 basis points. 90-day LIBOR is currently 3 percent and the current forward rates for the next four quarters are 3.2 percent, 3.6 percent, 3.8 percent, and 4 percent. If these rates are actually realized, at the second quarterly settlement date, the fixed-rate payer in the swap will:

A)   receive a payment of $10,000.

B)   receive a payment of $5,000.

C)   neither make nor receive a payment.

D)   be required to pay $117,500.

The correct answer was B)

The payment at the second settlement date will be based on 90-day LIBOR realized at the first settlement date, 3.2%. The payment (net) by the floating-rate payer will be:

(0.032 + 0.015 - 0.045) × 90/360 × 10,000,000 = $5,000

5．Which of the following statements is TRUE concerning the above diagram? Counterparty:

A)   B will gain in the swap when interest rates increase.

B)   A will gain in the swap when interest rates increase.

C)   B receives a variable rate from counterparty A.

D)   B pays a fixed rate to counterparty A.

The correct answer was B)

From the diagram, counterparty A pays fixed to and receives variable from counterparty B. As interest rates rise, counterparty B owes counterparty A higher variable payments.

6.Which term does NOT apply to interest rate swaps?

A)   Trading exchange.

B)   Time to maturity.

C)   Settlement frequency.

D)   Notional principal amount.

The correct answer was A)

Interest rate swaps are currently not traded on exchanges.

7.Which of the following statements about swaps is FALSE?

A)   In an interest rate swap, only the net interest payments are made.

B)   In a currency swap, the notational principal is actually swapped twice, once at the beginning of the swap and again at the termination of the swap.

C)   In an interest rate swap, the pay-fixed party makes a sequence of fixed rate interest payments and receives a sequence of floating rate interest payments.

D)   In a currency swap, only net interest payments are made.

The correct answer was D)

In a currency swap, the two parties exchange cash at the initiation, make periodic interest payments to each other during the life of the swap agreement, and exchange the principal at the termination of the swap.