Caps and Floors Are Used in Conjunction with Derivatives To

question 36

Multiple Choice

Caps and floors are used in conjunction with derivatives to:

• A)limit any impact from interest rate changes.
• B)increase the rate of return to the derivative holder.
• C)increase the volatility of the at-risk asset.
• D)offset the costs associated with establishing the derivative position.
• E)lower acquisition costs irrespective of financing costs.

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Definitions:

Hypnotically Suggestible

Referring to the extent to which an individual is likely to respond to suggestions made during hypnosis.

Imagination

The faculty or action of forming new ideas, or images or concepts of external objects not presently seen or experienced.

Dissociation Theory

A psychological theory suggesting that individuals can detach from their immediate surroundings or from their physical and emotional experiences, often as a defense mechanism.

Simultaneously

Simultaneously refers to events or actions occurring at the same time, happening concurrently.