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LOS b, (Part 4): Define and give examples of equity swaps. ffice ffice" />
Q1. An equity swap can specify that one party pay any of the following EXCEPT:
A) the return on a specific portfolio of three stocks including dividends.
B) the total return on a corporate bond.
C) the return on a single stock.
Correct answer is B)
A swap involving the return on a bond would not be an equity swap.
Q2. When one party pays a fixed rate of interest in an equity swap, which of the following is least accurate?
A) The equity-return payer will gain if the equity return is zero.
B) The fixed-rate receiver will never get more than the fixed rate.
C) Unlike other swaps, in an equity swap the one-quarter-ahead payment is not known at the end of the previous quarter.
Correct answer is B)
If the periodic return on the equity is negative, the fixed-rate payer must pay the fixed rate plus the percentage of (negative) equity return, times the notional principal.
Q3. A contract in which one party pays a fixed rate of interest on a notional amount in return for the return on a single stock, paid quarterly for four quarters, is a(n):
A) equity swap.
B) returns swap.
C) plain vanilla swap.
Correct answer is A)
A swap contract in which at least one party makes payments based on the return on an equity, portfolio, or market index, is called an equity swap.
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发表于 2009-3-2 12:16
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