Question

When pricing an interest-rate swap, the floating-rate payments are calculated using ________ rates, and their present...

When pricing an interest-rate swap, the floating-rate payments are calculated using ________ rates, and their present values are calculated using ___________ rates.

Spot; Forward

Forward; Spot

Spot; Risk-Adjusted

Risk-Adjusted; Spot
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Answer #1

When pricing an interest-rate swap, the floating-rate payments are calculated using Spot rates, and their present values are calculated using Risk Adjusted rates.

Spot Rate because floating rate payments are made at the prevailing rates. Present value is calculated using the Risk Adjusted Rates.

Option 3 is correct. Spot, Risk Adjusted

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