Question

d. The buyer of a swap pays fixed and the seller pays floating. ___

e. The 10 year swap rate is nearly always lower than the on-the-run 10 year Treasury rate. _____

f. The last payment by a seller of a swap is the fixed rate coupon plus the principal. _____

g. Once the contract is underway, a buyer in a swap contract would prefer to see rates rise more than expected. _______

True or False

Answer 1

Answers-

Q d)

The statement is True. The buyer pays fixed and receives floating whereas the seller recieves fixed and pays floating.

Q e)

The statement is False. The 10 year swap rate is mostly higher than 10 year treasury rate

Q f)

The statement is False. The seller of swap pays floating rate coupon and the principal is exchanged in currency swap but notin interest rate swap.

Q g)

The statement is True. The buyer of swap contract benefits when the borrowing rate increases and the seller of swap contract benefits when the borrowing rate decreases.