A Thrift Purchases a One-Year Interest Rate Floor with a Floor

question 57

Multiple Choice

A thrift purchases a one-year interest rate floor with a floor rate of 4.23 percent from a large bank. The option has a notional principal of $1 million and costs $2,000. If in one year,interest rates are 3 percent,the thrift's net profit,ignoring commissions and taxes,was _____ ; and if in one year,interest rates were 2 percent,the thrift's net profit was _____.

• A)$0; $7,500
• B)$8,800; -$2,000
• C)$8,800; $0
• D)$29,500; -$2,000
• E)$29,500; $0

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Definitions:

Task Analysis

The examination and breakdown of tasks to understand their components, processes, and the skills required for their completion.

Formal Authority

Formal authority refers to the power or right to make decisions, command subordinates, and enforce obedience, typically granted by a position within an organizational hierarchy.

Blending Team Members

The process of integrating individuals with diverse backgrounds, skills, and perspectives into a cohesive team.

Temporary Endeavor

A unique project or program established to achieve a specific goal or set of objectives within a defined timeframe.