Suppose That a Company Has Issued a Floating Rate Note

question 15

Multiple Choice

Suppose that a company has issued a floating rate note paying (bbalibor) .To create an interest rate collar that confines the payments between 3 percent and 7 percent,the company should trade the following interest rate derivatives:

• A) buy a cap with a strike rate of 6.50 percent and sell a floor with a strike rate of 2.50 percent
• B) buy a cap with a strike rate of 7.00 percent and sell a floor with a strike rate of 3.00 percent
• C) buy a cap with a strike rate of 6.50 percent and sell a floor with a strike rate of 3.50 percent
• D) sell a cap with a strike rate of 7.00 percent and buy a floor with a strike rate of 3.00 percent
• E) sell a floor with a strike rate of 6.50 percent and buy a floor with a strike rate of 2.50 percent

Recognize the importance of econometrics and empirical data in forming and testing economic hypotheses.

Comprehend the concepts of marginalism and its relevance in economic decisions.

Understand the diverse educational and skill needs of entrepreneurs.

Recognize the myths and realities of entrepreneurship.

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