Dog's can borrow money at either a fixed rate of 8.25 percent or a variable rate set at prime plus 0.5 percent

Which one of the following methods of setting prices would reduce the transactions exposure for both the buyer and seller of a swap contract?    A.  setting a permanent price at which a commodity will be traded B.  setting the price at the minimum spot price during a given period of time C.  setting the price equal to the spot price on the delivery date D.  using the average market price over a given period of time E.  setting the contract price equal to some percentage, less than 100 percent, of the market price on any given day Refer to section 23.5

32.	A swap dealer in the U.S.:    A.  acts solely as a seller of swap contracts. B.  matches buyers to sellers. C.  only deals if its book is matched. D.  is frequently a commercial bank. E.  trades electronically via NASDAQ. Refer to section 23.5

33.

Company A can borrow money at a fixed rate of 7.5 percent or a variable rate set at prime plus 0.5 percent. Company B can borrow money at a variable rate of prime plus 1 percent or a fixed rate of 7 percent. Company A prefers a fixed rate and company B prefers a variable rate. Given this information, which one of the following statements is correct?    A.  Company A can swap with B and pay a fixed rate of 7.25 percent. B.  If Company A swaps with B, Company A could pay a fixed rate of 6.5 percent. C.  If Company B swaps with A, Company B must pay a fixed rate of 8 percent. D.  Company B can swap with A such that Company B pays the variable prime rate. E.  There are no terms under which both Company A and Company B can swap interest rates and both realize a profit. Refer to section 23.5

34.

Dog's can borrow money at either a fixed rate of 8.25 percent or a variable rate set at prime plus 0.5 percent. Cat's can borrow money at either a variable rate of prime plus 1 percent or a fixed rate of 8 percent. Dog's prefers a fixed rate and Cat's prefers a variable rate. Given this information, which one of the following statements is correct?    A.  After a swap with Cat's, Dog's could end up paying a fixed rate of 7.8 percent. B.  Cat's should end up paying the prime rate if it agrees to an interest rate swap with Dog's. C.  Both firms will profit if they swap an 8.15 percent fixed rate for a prime plus 0.75 percent variable rate. D.  Dog's will end up paying no more than 7.75 percent as a fixed rate after a swap with Cat's. E.  Dog's and Cat's cannot swap interest rates in a manner that will be profitable for both firms. Refer to section 23.5