1. What differentiates a Total Return Swap (TRS) from a Loan Portfolio Swap (LPS)? (15 mark)

2. VAR asksthesimplequestion:"Howbadcanthingsget?"

Select one:

True

False

3. Whatisamismatchrisk(foranIRS)?

Select one:

i. Theriskthatitwillbedifficultto findcounterpartthatwantstoborrowtherightamountofmoney fortherightamountoftime

ii. Theriskthatacountrywillimposeexchangeraterestrictionsthatwillinterferewithperformance on theswaps

iii. Interest rates might move against the swap bank after it has only gotten half of a swap on thebooks,or ifithasanunhedgedposition

iv. Themajorriskfacedbyaswapdealer-theriskthatacounterpartywilldefaultonitsendofthe swaps

4. Whichofthefollowingdoesnotrelatetocreditrisks?

Select one:

i. Creditriskisthepossibilityofalossresultingfromaborrower'sfailuretorepayaloanormeet contractualobligations

ii. Creditriskalsodescribestheriskthataninsurancecompanywillbeabletopayaclaim.

iii. Itreferstotheriskthatalendermaynotreceivetheowedprincipalandinterest

iv. Creditriskdescribestheriskthatabondissuermayfailtomakepaymentwhenrequested

v. Creditriskisthepossibilityoflosingalendertakesonduetothepossibilityofaborrowernot paying back a loan