Which of the Following Statements About an Interest Rate Cap

Multiple Choice

Which of the following statements about an interest rate cap is correct?

A) For a company that has borrowed using a floating-rate loan,a long position in an interest rate cap prevents interest costs from going above a fixed level.
B) For a company that has purchased a floating-rate loan,a long position in an interest rate cap provides protection against the interest cost going above some fixed level.
C) An interest rate cap guarantees a forward rate that is binding at a future date.
D) An interest rate cap guarantees payments if spot prices move outside an interval,with caps at the top and bottom.
E) None of these answers are correct.