A Bank Can Establish a Floor on Interest Rate Costs

question 3

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:

Bankruptcy

A legal process through which individuals or businesses unable to meet their financial obligations can seek relief from some or all of their debts.

Real Defense

In negotiable-instruments law, any defense that can be used against everyone, including holders in due course. Also called absolute defense and universal defense.

Duress

An action by one party that forces another party to do what need not be done otherwise.

Personal Defense

In negotiable-instruments law, a defense that can be used against a holder but not against a holder in due course of a negotiable instrument. Also called limited defense.