Reading 65: LOS i (part 1)～ Q 1- 3 credit, black

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1.The credit risk of an interest-rate swap is greatest:

A)   late in the term.

B)   at the middle of the term.

C)   at the inception of the swap.

D)   just before the final payment must be made.

2.Compared to an equity swap, a currency swap has credit risk that is:

A)   greater, earlier in the swap.

B)   approximately the same during the life of the swap.

C)   greater, later in the swap.

D)   less credit risk over the life of the swap.

3.Current and potential credit risk in a swap are:

A)   equal at all times over the term of a swap.

B)   not equal at the inception of the swap.

C)   greatest between payment dates.

D)   less for the fixed rate payer.

 

 

[此贴子已经被作者于2008-5-14 17:53:34编辑过]

spaceedu

1.The credit risk of an interest-rate swap is greatest:

A)   late in the term.

B)   at the middle of the term.

C)   at the inception of the swap.

D)   just before the final payment must be made.

The correct answer was B)

The credit risk in an interest-rate swap is greatest at the middle of the swap.

2.Compared to an equity swap, a currency swap has credit risk that is:

A)   greater, earlier in the swap.

B)   approximately the same during the life of the swap.

C)   greater, later in the swap.

D)   less credit risk over the life of the swap.

The correct answer was C)

A currency swap has a final exchange of principal, moving the maximum credit risk later in the life of the swap.

3.Current and potential credit risk in a swap are:

A)   equal at all times over the term of a swap.

B)   not equal at the inception of the swap.

C)   greatest between payment dates.

D)   less for the fixed rate payer.

The correct answer was B)

Current credit risk is the risk of not receiving a payment currently due, since there is none at the inception of the swap, current credit risk is zero. Potential credit risk is the risk that payments possibly due in the future will not be made.