In a typical interest rate swap contract, the swap rate is best described as the
ID: 2785311 • Letter: I
Question
In a typical interest rate swap contract, the swap rate is best described as the interest rate for the:
A.
fixed-rate leg of the swap.
B.
floating-rate leg of the swap.
C.
difference between the fixed and float legs of the swap.
Are these statements correct?
Statement 1: The yield to maturity of a coupon bond is the expected rate of return on a bond if the bond is held to maturity, there is no default, and the bond and all coupons are reinvested at the original yield to maturity.
Statement 2: Treasury curves and swap curves can differ because of differences in their credit exposures, liquidity, and other supply/demand factors.
A.
Both statements are correct.
B.
Both statements are not correct.
C.
Only statement 1 is correct.
D.
Only statement 2 is correct.
A.
fixed-rate leg of the swap.
B.
floating-rate leg of the swap.
C.
difference between the fixed and float legs of the swap.
Explanation / Answer
A. Fixed rate leg of the swap is considered to be the swap rate
A. Both statements mentioned above are correct
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