When the seller agrees to pay the buyer if a designated reference falls below a predetermined level, the agreement is called:
A) A swap.
B) A cap.
C) A floor.
D) The strike.
E) None of the above.

Question

Quizplus · Accepted Answer

A floor agreement in finance is a contract where the seller agrees to pay the buyer if a designated reference rate (such as an interest rate) falls below a predetermined level. This is used to protect the buyer from falling rates.

When the Seller Agrees to Pay the Buyer If a Designated