Multiple Choice
An equity swap may be used to time the markets.Given a current position in a $1,000 portfolio of 80:20 (equity:bonds) ,suppose you expect that bonds will perform relatively better than stocks and want to change the portfolio composition to 20:80,what swap would you enter into?
A) An equity swap to receive the equity return and pay the bond return for a notional of $1,000.
B) An equity swap to pay the equity return and receive the bond return for a notional of $1,000
C) An equity swap to receive the equity return and pay the bond return for a notional of $600.
D) An equity swap to pay the equity return and receive the bond return for a notional of $600
Correct Answer:
Verified
Correct Answer:
Verified
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