Leando Enterprises Has a Variable Rate Loan and Wants to Lock

question 124

Multiple Choice

Leando Enterprises has a variable rate loan and wants to lock in the rate so that the firm is in essence paying no more than 8.5% nor less than 7.5%. To do this, the firm needs to ____ a call and
____ a put option on interest rates.

• A) buy; buy
• B) buy; sell
• C) buy; ignore
• D) sell; buy
• E) sell; ignore

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Definitions:

Royal Authority

The power or right governing a monarchy, derived from a sovereign ruler such as a king or queen, with authority often considered divinely ordained or established by tradition.

Kingdom of Benin

A pre-colonial African empire located in what is now Nigeria, renowned for its art, especially its bronze sculptures.

Copper Plaques

Metal pieces often used for commemorative, artistic, or informative purposes.

European Trader

Historically, refers to merchants from Europe engaged in international trade, notably including the trade of slaves, goods, and resources from the 15th century onwards.