Which of the Following Best Describes a Zero Cost Collar

question 26

Multiple Choice

Which of the following best describes a zero cost collar within the context of interest rate derivatives?

• A)A zero cost collar is a long (short)position in an interest rate cap and a short (long)position in an interest rate floor where the cost of the cap (floor)exactly offsets the revenue from the floor (cap).
• B)A zero cost collar is a long (short)position in an interest rate cap and a short (long)position in an interest rate floor where the cost of the cap (floor)is less than the revenue from the floor (cap).
• C)A zero cost collar is a long (short)position in an interest rate cap and a short (long)position in an interest rate floor where the cost of the cap (floor)is greater than the revenue from the floor (cap).
• D)A zero cost collar is an option that pays off only if interest rates remain within a designated range.
• E)A zero cost collar is an option that pays off only if interest rates fall outside of a designated range.

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Definitions:

Urban Maori

Individuals of Maori descent who live in urban areas of New Zealand, often experiencing a different cultural identity from traditional Maori.

Social Change

Social change encompasses alterations in the social structure and cultural values of a society over time.

Intergroup Differentiation

Behaviour that emphasises differences between our own group and other groups.

Own Group

Refers to the social group to which an individual perceives they belong, often in contrast to an "out-group".