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PRMIA Exam 8006 Topic 1 Question 58 Discussion

Actual exam question for PRMIA's Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition exam
Question #: 58
Topic #: 1
[All Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition Questions]

A borrower pays a floating rate on a loan and wishes to convert it to a position where a fixed rate is paid. Which of the following can be used to accomplish this objective?

1. A short position in a fixed rate bond and a long position in an FRN

II. An long position in an interest rate collar and long an FRN

III. A short position in a fixed rate bond and a short position in an FRN

IV. An interest rate swap where the investor pays the fixed rate

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Suggested Answer: C

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