Suppose the Premium on a Three Year, Four Per Cent

question 15

Multiple Choice

Suppose the premium on a three year, four per cent floor is equal to the premium on a three year, eight per cent cap. This combination is referred to as

• A) zero-cost warrant
• B) zero-premium strap
• C) zero-cost collar
• D) zero-premium swap
• E) zero-cost FRA

---

Definitions:

UCC

The Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States, intended to harmonize the law among the states.

Warranty Rights

Legal entitlements or protections afforded to consumers, guaranteeing that a product will meet certain standards of performance and quality.

Privity

The direct relationship between parties to a contract, which determines who can sue whom to enforce rights or obligations under the contract.

Title Warranties

Legal guarantees provided by a seller that they have the right to transfer ownership and that the asset is free from liens or encumbrances.