In Regards to Interest Rate Options, Which of the Below

question 33

Multiple Choice

In regards to interest rate options, which of the below statements is TRUE?

• A) Interest rate options cannot be written on cash instruments or futures.
• B) At one time, there were several exchange-traded option contracts whose underlying instrument was a debt instrument. These contracts are referred to as futures on physicals.
• C) In recent years, market participants have made decreasingly greater use of over-the-counter options on Treasury, agency debentures, and mortgage-backed securities.
• D) Besides options on fixed-income securities, investors can obtain OTC options on a yield spread.

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Definitions:

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the number of units produced.

Average Variable Cost

The total variable cost of production divided by the number of units produced, indicating the variable cost per unit.

Break-even Point

The point at which total cost and total revenue are equal, meaning there is no profit or loss.

Average Total Cost (ATC)

Total cost divided by output.