A firm with a variable-rate loan wants to protect itself from increases in interest rates. Which of the following would interest this firm?

A firm with a variable-rate loan wants to protect itself from increases in interest rates. Which of the following would interest this firm?

I. interest rate floor II. interest rate cap III. put option on an interest rate IV. call option on an interest rate    A.  I only B.  I and III only C.  I and IV only D.  II and III only E.  II and IV only Refer to section 23.6

41.

If a firm creates an interest rate collar on a variable rate loan, then the rate the firm pays will always:    A.  remain constant at the average of the floor and cap rates. B.  remain constant at the floor rate. C.  remain constant at the cap rate. D.  be higher than, or equal to, the cap but lower than, or equal to, the floor. E.  be higher than, or equal to, the floor but lower than, or equal to, the cap. Refer to section 23.6

42.

Which one of the following actions will provide you with the right, but not the obligation, to sell the underlying asset at a specified price during a specified period of time?    A.  purchase of a call option B.  sale of a call option C.  purchase of a put option D.  sale of a put option E.  swap Refer to section 23.6

43.	Which one of the following obligates you only on the expiration date to sell an asset at the strike price if the option is exercised?    A.  American call B.  American put C.  European call D.  European put E.  European swap Refer to section 23.6

44.

Which one of the following statements concerning option payoffs is correct?    A.  The buyer of a call profits when the exercise price exceeds the market price. B.  The buyer of a call profits when the strike price exceeds the exercise price. C.  A put will only be exercised if both the seller and the buyer can profit. D.  Both the buyer and the seller profit when a call is exercised. E.  The seller of a put incurs a loss when a put is exercised. Refer to section 23.6