Which of the Following Best Describes a Zero Cost Collar

question 26

Multiple Choice

Which of the following best describes a zero cost collar within the context of interest rate derivatives?

• A)A zero cost collar is a long (short)position in an interest rate cap and a short (long)position in an interest rate floor where the cost of the cap (floor)exactly offsets the revenue from the floor (cap).
• B)A zero cost collar is a long (short)position in an interest rate cap and a short (long)position in an interest rate floor where the cost of the cap (floor)is less than the revenue from the floor (cap).
• C)A zero cost collar is a long (short)position in an interest rate cap and a short (long)position in an interest rate floor where the cost of the cap (floor)is greater than the revenue from the floor (cap).
• D)A zero cost collar is an option that pays off only if interest rates remain within a designated range.
• E)A zero cost collar is an option that pays off only if interest rates fall outside of a designated range.

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Definitions:

Androgens

A group of hormones that play a role in male traits and reproductive activity, present in both males and females.

Lesion Method

The removal or disabling of a brain structure to gain better understanding of its function; this method is used only in animals.

Transcranial Direct Current Stimulation

A form of neurostimulation that uses constant, low current delivered directly to the brain area via electrodes on the scalp.

Animals

Multicellular, eukaryotic organisms of the kingdom Animalia that are capable of locomotion, responsive to their environment, and feed by consuming other organisms.