To 'Lock-In' a 90-Day Borrowing Rate a Hedger Can

question 22

Multiple Choice

To 'lock-in' a 90-day borrowing rate a hedger can:

• A)buy a call option on a BAB futures contract
• B)sell a call option on a BAB futures contract
• C)buy a put option on a BAB futures contract
• D)sell a put option on a BAB futures contract.
• E)None of these.

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Definitions:

Government's Revenue

The money received by a government from taxes and non-tax sources to enable it to undertake government expenditures.

Efficiency Loss

Refers to the loss of economic efficiency when the optimal allocation of resources is not achieved, often due to market failures or distortions.

Demand Curve

A chart that displays how the cost of a product affects the amount consumers want to buy, usually showing a decline from left to right.

Supply Curve

A graphical representation showing the relationship between the price of a good or service and the quantity of it that suppliers are willing to sell at various prices.