When Interest Rates Are Forecasted to Rise,a Company Approaches Its

Multiple Choice

When interest rates are forecasted to rise,a company approaches its bank before the next roll-over date of its current debt facilities,and buys an interest rate cap option.However,the company is concerned at the cost of the cap premium and decides to simultaneously sell an interest rate floor option of the same maturity.Which of the following statements is correct?

A) The transactions may be described as an exchange traded options contract.
B) The company has obtained cover with a collar option strategy.
C) This option strategy will achieve a zero cost outcome for the company.
D) All of the given answers are correct.