If a fiRm Creates an Interest Rate Collar on a Variable

question 297

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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