You have taken a 5-year bullet loan carrying a floating interest rate. Market interest rates are...

You have taken a 5-year bullet loan carrying a floating interest rate. Market interest rates are likely to rise in future.Which product is best suited for you? Select one:

a. Interest rate Collar

b. None of these

c. Interest rate Cap

d. Interest rate Floor

Expert Solution

You have taken a 5-year bullet loan carrying a floating interest rate. Market interest rates are likely to rise in future.Which product is best suited for you? Select one:

a. Interest rate Cap

Explanation: In the given situation when loan is at floating interest rate and the market rates are likely to rise in future, we will take the "Interest Rate Cap" and if the market interest rate goes above excercise rate then the difference between actual rate and excercise rate will be gain and mitigate the risk of payment of excess interest.

jeff jeffy answered 2 years ago

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