One Advantage of Caps, Collars, and Floors Is That Because

question 4

True/False

One advantage of caps, collars, and floors is that because they are exchange-traded options there is no counterparty risk present in the transactions.

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Definitions:

Proportional Tax

A tax system where the rate remains constant regardless of the amount on which the tax is imposed.

Proportional Tax

A tax system where the tax rate remains constant regardless of the amount subject to tax, causing taxpayers to pay the same percentage of their income irrespective of its size.

Deductions

Expenses subtracted from gross income to determine the taxable income.

Excise Tax

A tax levied on certain goods, services, and activities, such as tobacco, alcohol, and fuel, usually to discourage their consumption and raise government revenue.