The Writer of an Interest Rate Floor Contract

question 17

Multiple Choice

The writer of an interest rate floor contract:

• A) has the obligation to buy the underlying bond at a fixed price
• B) has the obligation to sell the underlying bond at a fixed price
• C) has the obligation to pay (the strike rate minus the spot rate)times the notional
• D) has the obligation to pay (the spot rate minus the strike rate)times the notional in case it's a positive number
• E) has the obligation to pay (the strike rate minus the spot rate)times the notional in case it's a positive number

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Definitions:

Remuneration Expense

The total cost incurred by an entity for the payment of salaries, wages, and other forms of compensation to employees.

Vesting Period

The vesting period is the time during which an employee must wait to earn the right to fully own employer-provided stock options or contributions to a retirement plan.

Remuneration Expense

The total cost incurred by a company to compensate its employees, including wages, salaries, and benefits.

Exercise Price

The specified price at which an option's underlying security can be bought (call option) or sold (put option) by the option holder.