Interest rate caps/floors
Miller asks Johnson to hedge a hypothetical short position in the floating rate bond in Table 2. Which of the following is the best hedge for this position?
A) Sell an interest rate cap.
B) Buy an interest rate floor.
C) Buy an interest rate cap.
I thought I had this but not sure whey my answer is wrong. Will follow up when you guys have the chance to answer the question.
Thanks. |