LOS j: Define swap spread and relate it to credit risk.

Q1. A swap spread is the difference between:

A)   LIBOR and the fixed rate on the swap.

B)   the fixed-rate and floating-rate payment rates at the inception of the swap.

C)   the fixed rate on an interest rate swap and the rate on a Treasury bond of maturity equal to that of the swap.

Q2. The swap spread will increase with:

A)   an increase in the credit spread embedded in the reference.

B)   the variability of interest rates.

C)   a deterioration in one party’s credit.

Q3. A swap spread depends primarily on the:

A)   shape of the reference rate yield curve.

B)   general level of credit risk in the overall economy.

C)   credit of the parties involved in the swap.

Q4. For an interest rate swap, the swap spread is the difference between the:

A)   swap rate and the corresponding Treasury rate.

B)   fixed rate and the floating rate in a given period.

C)   average fixed rate and the average floating rate over the life of the contract.

LOS j: Define swap spread and relate it to credit risk. fficeffice" />

Q1. A swap spread is the difference between:

A)   LIBOR and the fixed rate on the swap.

B)   the fixed-rate and floating-rate payment rates at the inception of the swap.

C)   the fixed rate on an interest rate swap and the rate on a Treasury bond of maturity equal to that of the swap.

Correct answer is C)

A swap spread is the difference between the fixed rate on an interest rate swap and a Treasury bond of maturity equal to that of the swap.

Q2. The swap spread will increase with:

A)   an increase in the credit spread embedded in the reference.

B)   the variability of interest rates.

C)   a deterioration in one party’s credit.

Correct answer is A)

The swap spread is the spread between the fixed-rate on a market-rate swap and the Treasury rate on a similar maturity note/bond. Since the fixed rate is calculated from the reference rate yield curve, it is increased as the credit spread embedded in the reference rate yield curve increases.

Q3. A swap spread depends primarily on the:

A)   shape of the reference rate yield curve.

B)   general level of credit risk in the overall economy.

C)   credit of the parties involved in the swap.

Correct answer is B)

The swap spread depends primarily on the general level of credit risk in the overall economy.

Q4. For an interest rate swap, the swap spread is the difference between the:

A)   swap rate and the corresponding Treasury rate.

B)   fixed rate and the floating rate in a given period.

C)   average fixed rate and the average floating rate over the life of the contract.

Correct answer is A)

The swap spread is the swap rate minus the corresponding Treasury rate.

07年官方CFA L2 付费模拟题3 （50美金题）

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