Multiple Choice
Which of the below statements is FALSE?
A) In an interest rate cap and floor, the buyer pays an upfront fee, which represents the maximum amount the buyer can lose and the maximum amount the writer of the agreement can gain.
B) The seller (writer) of an interest rate cap benefits if the underlying interest rate rises above the strike rate because the buyer must compensate the buyer.
C) In essence, interest rate caps and interest rate floors contracts are equivalent to a package of interest rate options.
D) The buyer of an interest rate floor benefits if the interest rate falls below the strike rate because the seller (writer) must compensate the buyer.
Correct Answer:
Verified
Correct Answer:
Verified
Q1: In comparing a swap to a futures
Q2: If at the settlement date the settlement
Q3: What is a forward rate agreement (FRA)?
Q4: There are two ways that a swap
Q6: A _ can be viewed as a
Q7: For swaps with maturities of less than
Q8: If the FRA has a _ of
Q9: _ the over-the-counter equivalent of the exchange-traded
Q10: An interest rate floor can be used
Q11: The terms of an interest rate agreement