A Bank Can Establish a Floor on Interest Rate Costs

question 16

Multiple Choice

A bank can establish a floor on interest rate costs by:

• A)buying a call option on Eurodollar futures.
• B)selling Eurodollar futures contracts.
• C)selling a call option on Eurodollar futures.
• D)a.and b.
• E)b.and c.

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Definitions:

Sales

The exchange of goods or services for money; also refers to the function or department within a business that handles this activity.

Times Interest Earned Ratio

A financial metric that measures a company's ability to meet its debt obligations based on its current income.

Operating Income

The profit realized from a business's operations, after deducting operating expenses like wages and cost of goods sold, but before interest and taxes.

Interest Expense

The cost incurred by an entity for borrowed funds, typically expressed as a yearly rate.