- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 6. Pricing and Valuation of Swap Contracts

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**CFA Practice Question**

Consider a two-year plain-vanilla swap. Fixed rate is 6%. Libor is currently 5.5%. Notional principal is $10 million. Who pays whom how much when the swap is originated?

A. Fixed receiver pays the fixed payer $25,000.

B. Fixed payer pays the fixed receiver $50,000.

C. Nobody pays anybody anything.

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**User Contributed Comments**
8

User |
Comment |
---|---|

shasha |
except for "in-advance" swap? |

nchilds |
this question is making an inferential reference to currency swaps, where each party makes an intial swaps of currency at origination. |

danlan |
It's a interest swap, so no principal is exchanged at the beginning, right? |

george2006 |
At origination, no one pays anyone anything. But in settlement dates later, they were settle on notational amt * (rate difference) |

labsbamb |
ok currency swap exchange of notional amount at the beginning interest swap no exchange by each party at the begi ning,and settle on notional amt * (rate difference). |

boddunah |
plain vanilla swap |

rana1970 |
in swap, floating rate is set in advance and paid in arrear. |

tricorp |
Good one... |