An Interest Rate Collar Involves the Purchase of an Interest

question 33

True/False

An interest rate collar involves the purchase of an interest rate cap and the simultaneously sale of an interest rate floor.

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Definitions:

Gain on Sale

An increase in funds resulting from selling an asset for more than its carrying amount on the balance sheet.

Decrease in Inventories

A reduction in the quantity or value of the inventory on hand, which may result from sales, usage, spoilage, or obsolescence.

Prepaid Expenses

Prepaid expenses are future expenses that have been paid in advance and are recorded as assets until they are actually incurred.

Dividends Payable

The amount of declared dividends that a company has committed to pay out to its shareholders but has not yet distributed.