Reading 70: Option Markets and Contracts LOSe习题精选 2010, investment, interest, investor

honeycfa

LOS e: Define interest rate caps, floors, and collars.

An investor who bought a floating-rate security and wishes to establish a minimum periodic cash flow on his investment could:

A) buy an interest-rate floor.

B) sell an interest-rate floor.

C) sell an interest-rate cap.

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The buyer of a floor will receive a payment when the floating rate is below the floor rate, effectively establishing a minimum rate on the floating rate security.

 

honeycfa

Buying an interest-rate cap and selling an interest-rate floor is equivalent to:

A) buying a series of interest-rate puts and selling a series of interest rate calls.

B) buying a series of interest-rate calls and selling a series of interest-rate puts.

C) buying a series of interest-rate puts and calls.

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A cap is equivalent to a series of (long) interest-rate calls and selling a floor is equivalent to selling a series of interest-rate puts.

honeycfa

The owner, of an interest-rate cap will:

A) be required to make a payment if the market rate exceeds the cap rate.

B) receive a payment if the market rate is less than the cap rate.

C) receive a payment if the market rate exceeds the cap rate.

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An interest-rate cap will pay its owner the maximum of zero or the market rate minus the cap rate, times the notional principal.