Which of the Following Best Describes a Zero Cost Collar

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.