An Interest Rate Collar Consists Of

question 30

Multiple Choice

An interest rate collar consists of:

• A) buying an interest rate cap and selling an interest rate floor.
• B) buying an interest rate floor and selling an interest rate cap.
• C) selling an interest rate floor and buying an interest rate cap.
• D) buying a call option and selling a futures contract.
• E) selling a put option and buying a futures contract.

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Definitions:

Traveler's Check

A preprinted, fixed-amount check designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.

Instrument

A formal document, especially one that legally records a fact, act, or agreement.

Enforceable Contract

A legally binding agreement that can be upheld and compelled in a court of law.

Negotiability

The quality of a financial instrument that allows it to be transferred from one party to another with minimal legal restrictions.