An inverse ﬂoater and super-inverses are more valuable to a purchaser if:
A)interest rates stay the same.
B)interest rates fall.
C)interest rates rise.
D)if held for a long time.
E)None of the above.

Question

Quizplus · Accepted Answer

Inverse floaters and super-inverses have a negative correlation with interest rates. This means that they increase in value when interest rates fall and decrease in value when interest rates rise. Therefore, they are more valuable to a purchaser if interest rates fall.

An Inverse ﬂOater and Super-Inverses Are More Valuable to a Purchaser