An interest rate cap is
A) an agreement in which the buyer makes a payment today in exchange for possible future payments if a reference interest rate exceeds a specified limit.
B) an agreement in which the buyer makes a payment today in exchange for possible future payments if a reference interest rate falls below a specified limit.
C) an agreement in which the CFTC commits to the buyer that it will make up any marginal payments due if a reference interest rate falls below a specified limit.
D) an agreement in which the CFTC commits to the buyer that it will make up any marginal payments due if a reference interest rate exceeds a specified limit.
E) The maximum allowable rate that can be earned on a swap agreement.
Correct Answer:
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