A Floating-Rate Borrower Wants to Use a Collar as a Hedge

question 20

Multiple Choice

A floating-rate borrower wants to use a collar as a hedge. Which of the following is appropriate?

• A) Buy a cap and sell a floor
• B) Buy a cap and buy a floor
• C) Sell a cap and sell a floor
• D) Sell a cap and buy a floor

---

Definitions:

Square Feet

A unit of area measurement equal to a square that is one foot on each side, used primarily in the United States.

Operating Department

A unit or division within a company that is directly involved in conducting core business operations, such as production or sales.

Garments

Clothing items or articles of dress; may also relate to the industry involved in designing and selling clothes.

Rental Expense

Rental Expense refers to the cost incurred for renting a property or equipment, categorized as an operating expense in financial accounting.