An exchange of an interest rate return for the total return on an equity index, plus or minus a spread is called:
A)a total return swap.
B)an interest rate swap.
C)a credit default swap.
D)a return forward.

Question

Quizplus · Accepted Answer

A total return swap involves exchanging the total return on an underlying asset, in this case, an equity index, and receiving a fixed or floating interest rate return in exchange. The spread can be added to the equity index return to calculate the total return received by the party. An interest rate swap involves exchanging a fixed interest rate for a floating interest rate or vice versa. A credit default swap involves exchanging the risk of default on a specific security or debt instrument. A return forward is an agreement to buy or sell an underlying asset at a predetermined price at a specified time in the future.

An Exchange of an Interest Rate Return for the Total