Reading 71: Option Markets and Contracts-LOS g 习题精选 2011, investment, interest, investor

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Session 17: Derivatives
Reading 71: Option Markets and Contracts

LOS g: 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.

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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.

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The owner, of an interest-rate cap will:

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

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

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

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An interest rate collar is created by buying:

A) an interest rate cap and selling an interest rate floor.

B) an interest rate floor and selling an interest rate cap.

C) both an interest rate cap and an interest rate floor.

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An interest rate collar combines a long interest rate cap with a short interest rate floor. Selling the floor offsets some of the cost of buying the cap.

luqian55

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