The writer of payer swaption

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Reference no: EM131905417

1. You wish to create a synthetic forward rate agreement in which you would lock in the current forward rate on borrowing a loan between day 180 and day 360. The price of a 180-day zero coupon bond is 0.9875 and the price of 360-day zero coupon bond is 0.9798. What are the transactions used to create this instrument?

A. long the 180-day bonds and short (FV) 0.9922 of the 360-day bonds.

B. short the 180-day bonds and long in (FV) 0.9922 of the 360-day bonds.

C. short the 180-day bonds and long in (FV)1.0079 of the 360-day bonds.

D. long the 180-day bonds and short (FV) 1.0079 of the 360-day bonds.

2. The writer of a payer swaption has:

A. the right to enter a swap in the future as the floating-rate payer.

B. the right to enter a swap in the future as the fixed-rate payer.

C. an obligation to enter a swap in the future as the floating-rate payer.

D. an obligation to enter a swap in the future as the fixed-rate payer.

Reference no: EM131905417

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