An Interest Rate Collar Has a Cap Strike Rate of 10.00

question 16

Multiple Choice

An interest rate collar has a cap strike rate of 10.00% and a floor strike rate of 9.50%.If the reference interest rate moves from 9.50% to 9.75%,what is the effective rate of the collar?

• A)9.50%
• B)9.625%
• C)9.75%
• D)9.875%
• E)10.00%

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Definitions:

Depreciates

The reduction in the value of an asset over time, typically due to wear and tear or obsolescence.

Exchange Rate

The value of one currency for the purpose of conversion to another, determining how much one currency is worth in terms of another.

Appreciates

An increase in the value of an asset or currency over time, often due to factors like demand, inflation, or changes in interest rates.

Appreciates

Increases in value or worth, often used in the context of financial investments or property.