question is :
Miller asks johnson which of the following strategies allows an investor to benefit from both increasing and decreasing interest rates?
a) buy an at the money cap and sell an at the money floor
b) buy an at the money cap and an at the money floor
c) sell an at the money cap and an at the money floor.
right answer is A
reason given : the cap provides a positive payoff when interest rates rise and the floor provides positive payoff when interest rates fall.
what I don’t get : an investor would want a min return on his investment so why would he agree to sell a floor instead of buying one? Also it says that the cap provides positive payoff. would I not rather sell a cap and buy a floor ? …