In a typical interest rate swap contract, the swap rate is best described as the interest rate for the:
A. fixed-rate leg of the swap.
B. floating-rate leg of the swap.
C. difference between the fixed and float legs of the swap.
Are these statements correct?
Statement 1: The yield to maturity of a coupon bond is the expected rate of return on a bond if the bond is held to maturity, there is no default, and the bond and all coupons are reinvested at the original yield to maturity.
Statement 2: Treasury curves and swap curves can differ because of differences in their credit exposures, liquidity, and other supply/demand factors.
A. Both statements are correct.
B. Both statements are not correct.
C. Only statement 1 is correct.
D. Only statement 2 is correct.