Reading 65: LOS g ～ Q 1- 2 price, black, option, percent, exercise

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1.Consider a 3-year quarterly-pay bond to be issued in 180 days with a 7 percent coupon. A 180-day put option on this bond, with an exercise price rate of 7 percent, has a payoff equal to that of a:

A)   payer swaption.

B)   receiver swaption.

C)   payer swap.

D)   receiver swap.

2.The payoff on a receiver swaption is most like that of a:

A)   call option on a coupon bond.

B)   put option on a coupon bond.

C)   call option on a discount bond.

D)   put option on a discount bond.

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1.Consider a 3-year quarterly-pay bond to be issued in 180 days with a 7 percent coupon. A 180-day put option on this bond, with an exercise price rate of 7 percent, has a payoff equal to that of a:

A)   payer swaption.

B)   receiver swaption.

C)   payer swap.

D)   receiver swap.

The correct answer was A)

The payoff on a payer swaption is equivalent to that of a put option on a bond as described in the question.

2.The payoff on a receiver swaption is most like that of a:

A)   call option on a coupon bond.

B)   put option on a coupon bond.

C)   call option on a discount bond.

D)   put option on a discount bond.

The correct answer was A)

The payoff on a receiver swaption is like that of a call option on a bond issued at the exercise date of the swaption, with a coupon equal to the fixed rate of the swap, and a term equal to that of the swap.