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In a Zero Cost Collar,the Exercise Price on the Floor

question 54

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In a zero cost collar,the exercise price on the floor is set such that the floor premium more than offsets the cap premium.


Definitions:

Common Stock

Shares representing ownership in a company, giving holders voting rights and a share in the company's profits through dividends.

Retained Earnings

Profits that a company has kept or retained rather than paid out as dividends to shareholders.

Dividends

Payments made by a corporation to its shareholder members, typically from profits earned.

Revenues

The total amount of money received by the company for goods sold or services provided during a certain period.

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