CFA Practice Question
Which of the following is incorrect?
A. Call money rate is the interest rate charged to a broker on the money lent to a buyer for margin purchases.
B. An embedded option valuable to the bondholder would be Right to Call.
C. An embedded option valuable to a issuer would be Cap on a Floating Rate Bond.
Explanation: An embedded option valuable to the issuer (buyer) would be Right to Call (Put).
User Contributed Comments 2
| User | Comment |
|---|---|
| reganbaha | call money rate is the rate that a bank charges a broker to provide funds for margin loans. The broker will add a premium on top to take his cut. |
| GBolt93 | Believe Reganbaha is correct as per one of the earlier questions that was the definition given. Note it is the rate charged to a broker, not by a broker. |