Question

In: Finance

What is a swap spread? The difference in yield between the fixed rate on a swap...

  1. What is a swap spread?
  1. The difference in yield between the fixed rate on a swap and the yield of an equal maturity US Treasury.
  2. The difference in yield on LIBOR and the fixed rate on a swap.
  3. The difference in yield on SOFR and LIBOR.
  4. The difference in yield between a “BBB” rated corporate bond and the payments in a CDS contract on that corporation.
  5. The difference in yield between LIBOR and 90-day T-Bills.

Solutions

Expert Solution

Correct option is "A" - The difference in yield between the fixed rate on a swap and the yield of an equal maturity US Treasury.

Swap spread is a difference between swap rate of fixed leg and yield on government security with same maturity

For example :

A 15 year Swap has a fixed rate = 4% while A 15 year treasury note has a interest ate of 3%

so Swap spread = 4 -3 = 1$

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

What is the cause of the difference between the net difference of receiving fixed-rate and paying...
What is the cause of the difference between the net difference of receiving fixed-rate and paying the floating rate for swaps using LIBOR rate and OIS rate (in this case the net difference using OIS rate is higher than the net difference using LIBOR given OIS paid less floating rate)
What is the difference between a bond’s coupon rate and its market interest rate (yield)?
What is the difference between a bond’s coupon rate and its market interest rate (yield)?
During​ 2008, the difference in yield​ (the yield spread​) between​ 3-month AA-rated financial commercial paper and​...
During​ 2008, the difference in yield​ (the yield spread​) between​ 3-month AA-rated financial commercial paper and​ 3-month AA-rated nonfinancial commercial paper steadily increased from its usual level of close to​ zero, spiking to over a full percentage point at its peak in October 2008. Which of the following explains this sudden​ increase? A. Increased yield spreads tend to occur because of the inefficient nature of nonfinancial commercial paper when economic instability is present. B. The increase in the yield spread...
A term spread is the difference between the rate on the 10 year treasury bond and...
A term spread is the difference between the rate on the 10 year treasury bond and a 30 year corporate bond TRUE OR FALSE
2. What is the difference between a bond’s coupon interest rate, current yield, and required rate...
2. What is the difference between a bond’s coupon interest rate, current yield, and required rate of return? 3. What do bond ratings show you? 4. What is a preferred stock? Why preferred stocks are called hybrid securities?
What is the difference between the yield on a discount basis and the yield to maturity...
What is the difference between the yield on a discount basis and the yield to maturity for a T-bill? How might a firm use the commercial paper market to deal with seasonal fluctuations in sales?
a. What is the difference between coupon rate and yield to maturity? How do you use...
a. What is the difference between coupon rate and yield to maturity? How do you use the coupon rate to calculate the periodic payment received from a bond? b. What is the price of a bond that is currently trading at a yield of 10% and has a face value of $1,000? This bond still has exactly 5 years to maturity. This bond pays semi-annual coupon at an annual rate of 8% (i.e., each coupon is 4%). Show how you...
h) What is the difference between fixed costs and variable costs? What is the difference between...
h) What is the difference between fixed costs and variable costs? What is the difference between accounting costs and economic costs? What is the differ - ence between private costs and external costs? Name all the categories that comprise economic costs. i) How do we determine the profit-maximizing level of production using analy - sis of total costs and total revenues? What is the rule for profit maximization using marginal analysis? What happens to economic profits in a perfectly competitive...
Explain the difference between a fixed rate and a managed rate foreign exchange rate regime and...
Explain the difference between a fixed rate and a managed rate foreign exchange rate regime and their advantages and disadvantages. Using an example explain how governments under a managed floating rate regime intervene to get their FX rate in line using a sterilized intervention.
Explain the difference between a fixed rate and a managed rate foreign exchange rate regime and...
Explain the difference between a fixed rate and a managed rate foreign exchange rate regime and their advantages and disadvantages. Using an example explain how governments under a managed floating rate regime intervene to get their FX rate in line using a sterilized intervention
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT