Which of the Below Statements Is FALSE

question 5

Multiple Choice

Which of the below statements is FALSE?

• A) In an interest rate cap and floor, the buyer pays an upfront fee, which represents the maximum amount the buyer can lose and the maximum amount the writer of the agreement can gain.
• B) The seller (writer) of an interest rate cap benefits if the underlying interest rate rises above the strike rate because the buyer must compensate the buyer.
• C) In essence, interest rate caps and interest rate floors contracts are equivalent to a package of interest rate options.
• D) The buyer of an interest rate floor benefits if the interest rate falls below the strike rate because the seller (writer) must compensate the buyer.

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Definitions:

Moral Performance

The actual behavior of an individual in ethical or moral situations, reflecting their moral principles.

Specific Situations

Particular or distinct scenarios, conditions, or cases that are clearly identified or defined.

Ability

The possession of the means or skill to do something.

Sarcoplasmic Reticulum

A specialized type of smooth endoplasmic reticulum found in muscle cells, involved in the regulation of calcium ions.