The following information relates to Questions 16-29

-The swap spread is quoted as 50 bps. If the five-year uS Treasury bond is yielding 2%, the rate paid by the fixed payer in a five-year interest rate swap is closest to:
A) 0.50%.
B) 1.50%.
C) 2.50%.

Question

The following information relates to Questions 16-29
 
-The swap spread is quoted as 50 bps. If the five-year uS Treasury bond is yielding 2%, the rate paid by the fixed payer in a five-year interest rate swap is closest to:
A) 0.50%. 
B) 1.50%. 
C) 2.50%.

Quizplus · Accepted Answer

The rate paid by the fixed payer in a five-year interest rate swap is the sum of the US Treasury bond yield and the swap spread. Therefore, 2% (Treasury yield) + 0.50% (swap spread) = 2.50%.

The Following Information Relates to Questions 16-29