Solved

Why Might a Bank That Has Purchased a Cap Also

Question 64

Multiple Choice

Why might a bank that has purchased a cap also wish to also sell a floor?


A) By themselves, caps are ineffective at limiting changes in a bank's cost of funds in a desirable way.
B) Regulators require one to be used with the other.
C) Selling a floor reduces the cost of buying the cap.
D) Dealers won't sell a cap without also dealing with the floor to limit their own risk.
E) It is not a complete hedge without both positions.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents