11.  The equity return receiver in an equity return-for-fixed-rate equity swap receive
payments that are equivalent to which of the following strategies?
A. Buy and hold the index stocks and issue a fixed-rate bond.
B. Issue a bond, short the index stocks, and adjust the short position value to
the principal amount at each payment date.
C. Buy the index stocks, adjust the portfolio value to the notional amount of
the swap at each payment date, and issue a fixed-rate bond.

Consider a 2-year interest rate swap in which we pay LIBOR quarterly and receive 8o/o fixed semiannually. The notional value is $10 million. Assume theyield curve is flat. The receive-fixed side of this swap can be replicated with which of the following portfolios of interest rate options? Long position  Short position A. Puts at 8%  Calls at 8%B. Puts at 8%  Puts at  8% C. Calls at 8%  Puts at  8%