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CIMA Exam CIMAPRA19-F03-1 Topic 6 Question 91 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 91
Topic #: 6
[All CIMAPRA19-F03-1 Questions]

G purchased a put option that grants the right to cap the interest on a loan at 10.0%. Simultaneously, G sold a call option that grants the holder the benefits of any decrease if interest rates fall below 8.5%.

Which THREE possible s would be consistent with G's behavior?

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Suggested Answer: A, B, C

by Celeste at Jul 08, 2024, 09:30 PM

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Leonor
6 months ago
I'll go with A, C, and E. Gotta love these questions that test your understanding of basic options strategies. It's not rocket science, folks.
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Buffy
6 months ago
C) G is concerned that interest rates may rise above 10.0%.
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Cassandra
6 months ago
A) G is willing to risk the loss of savings from a fall in interest rates if that offsets the cost of limiting the cost of rises.
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Leonora
6 months ago
Haha, G must be a real risk-taker. Selling a call option on top of buying a put? Sounds like a recipe for either big profits or big losses. No in-between!
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Blythe
5 months ago
D) G is concerned that interest rates may rise above 8.5%.
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Dell
6 months ago
B) G's strategy is to ensure that its interest rates lie between 8.5% and 10.0%.
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Alesia
6 months ago
A) G is willing to risk the loss of savings from a fall in interest rates if that offsets the cost of limiting the cost of rises.
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Stevie
7 months ago
B is just silly. What kind of strategy is that? Trying to keep rates between 8.5% and 10%? Where's the upside in that?
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Von
6 months ago
D) G is concerned that interest rates may rise above 8.5%.
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Susy
6 months ago
C) G is concerned that interest rates may rise above 10.0%.
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Marjory
6 months ago
A) G is willing to risk the loss of savings from a fall in interest rates if that offsets the cost of limiting the cost of rises.
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Adria
7 months ago
But G also sold a call option to benefit from a decrease in interest rates.
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Daren
7 months ago
I agree, that's why G purchased the put option.
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Georgeanna
8 months ago
I think G is trying to limit the cost of rises.
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Roxane
8 months ago
A, C, and E seem like the logical choices here. G is clearly trying to hedge against interest rate rises while still benefiting from decreases. Simple stuff really.
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Shantell
6 months ago
E) G is concerned that interest rates may fall below 10%.
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Misty
6 months ago
C) G is concerned that interest rates may rise above 10.0%.
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Tomas
6 months ago
A) G is willing to risk the loss of savings from a fall in interest rates if that offsets the cost of limiting the cost of rises.
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Venita
7 months ago
C) G is concerned that interest rates may rise above 10.0%.
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Raina
7 months ago
A) G is willing to risk the loss of savings from a fall in interest rates if that offsets the cost of limiting the cost of rises.
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