A Long Position in an Interest Rate Call Would Be

question 32

Multiple Choice

A long position in an interest rate call would be appropriate for which of the following situations:

• A)a bond trader expects falling interest rates
• B)a party holding a short position in Eurodollar futures is concerned about losing money
• C)a borrower expects rising interest rates
• D)a lender expects rising interest rates
• E)a derivatives dealer is exposed to the risk of falling interest rates

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Definitions:

Average Price Level

An economic indicator that represents the overall level of prices in the economy by averaging the prices of all goods and services over a period.

Vertical Aggregate Supply Curve

A graphical representation where the aggregate supply does not change with the price level, indicating an economy at full employment.

Classical Economists

A group of 18th and 19th-century economists who believed in the theory that markets operate under the laws of supply and demand and that markets will self-regulate.

Unemployed Resources

Factors of production such as labor, capital, and natural resources that are not currently being used in the production process.