In a period when interest rates are expected to rise, ____ institutions will want a fixed-for-floating swap, and the fixed rate specified on interest rate swaps will be ____ under these conditions.

Question

Quizplus · Accepted Answer

In a period when interest rates are expected to rise, many institutions will want to lock in current rates to avoid paying more later, hence they prefer a fixed-for-floating swap. The fixed rate specified on interest rate swaps will be higher under these conditions because the expectation of rising rates is priced into the swap rate by the market.

In a Period When Interest Rates Are Expected to Rise