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

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To continue steadfastly or firmly in some state, purpose, or course of action despite opposition or difficulties.

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Refers to a lack of equality or similarity, especially in a way that is unfair.

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The judicial determination of a punishment to be imposed on a person found guilty of a crime.

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