The value of a pay-fixed,receive-floating interest rate swap is found as the value of a
A)floating-rate bond minus the value of a fixed-rate bond.
B)fixed-rate bond minus the value of a floating-rate bond.
C)floating-rate bond minus the value of another floating-rate bond.
D)fixed-rate bond minus the value of another fixed-rate bond.
E)none of the above correctly identify how this value is found.

Question

Quizplus · Accepted Answer

The value of a pay-fixed, receive-floating interest rate swap is calculated as the difference between the value of a floating-rate bond (which represents the floating payments received) and the value of a fixed-rate bond (which represents the fixed payments made).

The Value of a Pay-Fixed,receive-Floating Interest Rate Swap Is Found