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.

---

Definitions:

Arbitrate

To officially settle a dispute or disagreement between two parties by making a decision as an impartial third party.

Direct Dialogue

A form of communication where parties engage in discussion without intermediaries, focused on clear and immediate exchange.

Third-Party Intervention

The involvement of an external entity in resolving disputes or conflicts between other parties, aiming to facilitate a negotiated solution.

Mediator

A neutral third party who facilitates a negotiated solution by using reasoning, persuasion, and suggestions for alternatives.