An index amortizing rate swap has a principal which decreases at a rate dependent on the interest
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An index amortizing rate swap has a principal which decreases at a rate dependent on the interest rate at settlement dates. Over a payment date, the principal changes from P to g(r)P, where g(r) is a function specified in the swap contract, and 0 ≤ g(r) ≤ 1. How will this affect the level of the fixed rate if the swap initially has no value?
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Explanation The level of the fixed rate will be affected by the fact that the principal will be ...View the full answer
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