Buying a cap option agreement
A)means buying a (or several) call option on interest rates.
B)means buying insurance against excessive decreases in interest rates.
C)allows more than one exercise date.
D)All of the above are correct.
E)Answers A and C only.

Question

Quizplus · Accepted Answer

A cap option agreement involves buying a call option on interest rates, which provides protection against rising interest rates. It also allows for multiple exercise dates, making both A and C correct.

Buying a Cap Option Agreement