In a world of negative short term interest rates where 3-month LIBOR is set at -

Question

In a world of negative short term interest rates where 3-month LIBOR is set at -0.50%

A.   The trader who enters a Receive fixed (@ +1.00%) and Pay floating swap would have positive cash flows on both sides of the swap for at least its first pay dates.
B.    A trader would prefer to receive money immediately rather than receive the same amount of money three months later.
C.    A trader would prefer to pay money immediately rather than pay the same amount of money three months later.
D.   Both A and C are true.

Explanation / Answer

In a world of negative short term interest rates where 3-month LIBOR is set at -0.50%

C. A trader would prefer to pay money immediately rather than pay the same amount of money three months later.

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