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Question
Consider a situation where the duration of the fixed portion of a swap is greater than the floating portion of a swap. Which of the following statements is most correct?
A. The fixed-rate payers gain when rates fall.
B. The market value of fixed-rate payments will decrease by more than the market value of floating-rate payments when interest rates fall.
C. The market value of fixed-rate payments will decrease by more than the market value of floating-rate payments when interest rates rise.
D. The floating-rate payers gain when rates rise.
E. The market value of the swap will increase with an increase in interest rates.
Answer
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