Explanation
A fixed for floating interest rate swap would be the most appropriate to the company's needs. It will allow it to receive a fixed rate (which will offset the fixed payment it has to make on the loan) and pay a floating rate which it expects will be lower than the fixed rates. Choice 'a' is the correct answer.

Explanation
The underlying asset in a treasury bond futures contract is any long term US Treasury bond with a maturity of more than 15 years and not callable within 15 years. The underlying asset in a Treasury note futures contract is any long term Treasury note with a maturity of no less than 6.5 years and no more than 10 years.
Note the difference between what the underlying asset is for treasury bond futures and treasury note futures. In either case, adjustments will be made for the coupon and maturity of the actual bond delivered (the concept of the adjustment of 'cheapest-to-deliver').

Explanation
Remember that:
- American options can be exercised at any time up to expiry
- European options can only be exercised at expiry
- Bermudan options can be exercised prior to expiry but only at certain dates or during certain specified periods, and not otherwise
- Since an American option can be exercised at any time prior to expiry while a European option can only be exercised at expiry, an American option will always be worth more than a European option Therefore the first three statements are incorrect and Choice 'd' is the correct answer.

Explanation
The existence of derivative markets actually drives liquidity out of cash markets into derivative markets.
Derivative markets are far more liquid than cash markets. Therefore statement I is not correct.
In times of crises, instruments or financial products bearing greater credit risk lose liquidity rapidly. Therefore statement II is correct.
A higher bid-ask spread indicates lower liquidity, not greater liquidity. Therefore statement III is false.
Normal market size (NMS) refers the 'normal' transaction size for which a dealer's quote is valid. A higher NMS is associated with greater liquidity, therefore statement IV is correct.

Explanation
The yield to maturity for a bond trading at par will be identical to its coupon. Therefore the yield to maturity for this bond will be 5%