An interest rate cap is actually a:
A) forward contract on interest rates.
B) put option on a bond.
C) call option on an interest rate.
D) deferred interest rate swap.
E) put option on an interest rate.

Question

An interest rate cap is actually a: 
A) forward contract on interest rates.
B) put option on a bond.
C) call option on an interest rate.
D) deferred interest rate swap.
E) put option on an interest rate.

Quizplus · Accepted Answer

An interest rate cap is a series of call options on interest rates, often referred to as caplets, which provide the purchaser with protection against rising interest rates above a specified level or strike price.

An Interest Rate Cap Is Actually A