The Treasurer of Z intends to use interest rate options to set an interest rate...

CIMA F3 Question Answer

The Treasurer of Z intends to use interest rate options to set an interest rate cap on Z’s borrowings.

Which of the following statement is correct?

The Treasurer should buy an interested rate floor and sell an interested cap ta the same time

The Treasurer will retain the benefit of movements in interest rates below the floor limit.

The cost of a collar is lower than the cost of a cap a one.

The Treasurer will have to negotiate the options with Z's bank.

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