If a Firm Creates an Interest Rate Collar on a Variable

question 11

Multiple Choice

If a firm creates an interest rate collar on a variable rate loan, then the rate the firm pays will always:

• A) Remain constant at the average of the floor and cap rates.
• B) Remain constant at the floor rate.
• C) Remain constant at the cap rate.
• D) Be higher than, or equal to, the cap but lower than, or equal to, the floor.
• E) Be higher than, or equal to, the floor but lower than, or equal to, the cap.

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Definitions:

Cancerous Tumor

An abnormal growth of cells that can invade and destroy surrounding tissue and potentially spread to other parts of the body.

Reticulosarcoma

An outdated term for a type of non-Hodgkin lymphoma that affects cells in the immune system, now more specifically classified.

Rhabdomyosarcoma

A malignant tumor of skeletal muscle tissue.

Leiomyosarcoma

A rare type of cancer that occurs in smooth muscle tissue, found in the uterus, stomach, intestines, and blood vessels.