A Bank Can Purchase a Cap on Interest Rates by

question 13

Multiple Choice

A bank can purchase a cap on interest rates by

• A) purchasing a put option on a financial futures contract.
• B) purchasing a call option on a financial futures contract
• C) writing a put option on a financial futures contract.
• D) selling T-Bond futures.

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Definitions:

Significant

Of considerable importance, size, or worth; likely to have influence or effect.

Uncertainty Resolution

The process of clarifying and reducing the uncertainty in decision-making or forecasting, particularly through the gathering of more information oranalysis.

Tends

Likely to behave in a particular way or follow a specific pattern over time.

High Dividend Payout

Refers to companies that return a large portion of their earnings to shareholders in the form of dividends, often signaling financial strength.