QUESTION: 129 Exam Topic: 2 Volume B

Interest rate swaps are:

Exchange traded derivative contracts that allow banks to take positions in future interest rates.
OTC derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term interest rates without relying on long-term funding.
Exchange traded derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term interest rates without having to use long-term funding.
OTC derivative contracts that allow banks to take positions in series of future exchange rates.

Answer(s): B

QUESTION: 130 Exam Topic: 2 Volume B

Which one of the following four interest rate related yield curves is used to revalue loan and deposit positions in banks?

Derivative
Bond
Cash
Basis

Answer(s): C

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QUESTION: 131 Exam Topic: 2 Volume B

What is a difference between currency swaps and interest rate swaps?

Currency swaps do not require the exchange of notional principal on maturity.
Currency swaps allow banks and customers to obtain the risk/reward profile of long-term interest rates without having to use long-term funding.
Currency swaps are OTC derivative contracts.
Currency swaps generate foreign exchange rate risk in addition to interest rate risk.

Answer(s): D

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QUESTION: 132 Exam Topic: 2 Volume B

James Arthur is a customer of a bank who has taken a floating rate loan from the bank. He is concerned that the rates may rise in the future increasing his payment amount.
Which of the following instruments should he buy to hedge against the rise in interest rates?

Interest rate floor
Interest rate cap
Index amortizing swap
Interest rate swap that receives fixed and pays floating

Answer(s): B

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QUESTION: 129 Exam Topic: 2 Volume B

QUESTION: 130 Exam Topic: 2 Volume B

QUESTION: 131 Exam Topic: 2 Volume B

QUESTION: 132 Exam Topic: 2 Volume B