A call option on the level of an interest rate is called an interest rate ______________.
A) Spread.
B) Swap.
C) Collar.
D) Cap.
E) Floor.

Name: A call option on the level of an interest rate is called an interest rate ______________. A) Spread. B) Swap. C) Collar. D) Cap. E) Floor.
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Question

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An interest rate cap is a type of call option on interest rates, where the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price.

A Call Option on the Level of an Interest Rate