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Plain vanilla or generic interest-rate swap

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Reference no: EM131787242

The manager of a savings and loan association is considering the use of a swap as part of its asset/ liability strategy. The swap would be used to convert the payments of its portfolio of fixed-rate residential mortgage loans into a floating payment.

a. What is the risk with using a plain vanilla or generic interest-rate swap?

b. Why might a manager consider using an interest-rate swap in which the notional principal amount declines over time?

c. Why might a manager consider buying a station?

Reference no: EM131787242

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