How can an interest-rate collar be created?
Answer to relevant QuestionsWhat is the cash flow of a 10-year bond that pays coupon interest semiannually, has a coupon rate of 7%, and has a par value of $100,000? Value a three-year interest rate floor with a $10 million notional amount and a floor rate of 4.8% using the binomial interest-rate trees shown in Exhibit 31-11. How can interest rate swap be used to reduce the duration of portfolio to match the duration of a benchmark? In the ISDA’s pay-as-you go template, why might there be payments by the credit protection buyer to the credit protection seller beyond that of the swap premium? Why is a portfolio manager concerned with more than default risk when assessing a portfolio’s credit exposure?
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