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:

Comparative Negligence

A theory in tort law under which the liability for injuries resulting from negligent acts is shared by all persons who were guilty of negligence, including the injured party, on the basis of each person’s proportionate carelessness.

"50 Percent" Rule

A principle in insurance, especially in regards to total loss claims, stipulating that if the cost of repairing an item exceeds 50% of its value, it is considered a total loss.

Assumption Of Risk

Voluntarily taking on a known risk. A defense against negligence that can be used when the plaintiff had knowledge of and appreciated a danger and voluntarily exposed himself or herself to the danger.

Duty Of Care

A legal obligation that requires individuals to exercise a reasonable level of caution and protection to avoid harm to others.