2007 GARP PRACTICE QUESTION 39

[EIA]

Hi David,

Kindly look through this question and confirm if option B is correct.

39. Which of the following statements is/are true?
I. In an add-up basket credit default swap, the pay-off occurs only when all
reference entities default.
II. In a binary credit default swap, the payoff in the event of default is a fixed
dollar amount.
III. In a total rate of return swap, the buyer of credit risk passes on any
appreciation in the value of the underlying asset to the seller of credit risk.
a. I only
b. II only
c. I and II
d. II and III

Regards

EIA

 

[sl]

Option D looks correct as statement iii is also correct.

 

[EIA]

I think so but the GARP guys say B.

Anyway thanks for sharing your idea.

BR

EIA