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LOS c: Determine the payoffs for a series of interest rate outcomes when a floating rate loan is combined with (1) an interest rate cap, (2) an interest rate floor, or (3) an interest rate collar.
Q1. A firm purchases a one-year cap with a strike rate of 4%, a notional principal of $3 million, and semiannual settlement. The reference rate at the initiation of the cap is 5%, falls to 4.5% at the next settlement and then to 4% one year after the cap’s initiation. The total payoffs (without discounting) over the maturity of the swap would be:
A) $25,500.
B) $7,583.
C) $22,792.
Q2. A firm purchases a collar with floor rate of 3% and a cap rate of 4.4%. The cap and floor have quarterly settlement and a notional principal of $10 million. The maximum outflow and inflow the buyer can expect on a given settlement is (assume equal settlement periods):
A) $75,000 and maximum inflow = infinite.
B) $110,000 and maximum inflow = $140,000.
C) $75,000 and maximum inflow = $140,000.
Q3. Which of the following is equivalent to a pay-fixed interest rate swap?
A) Buying a cap and selling an interest rate collar.
B) Selling a cap and buying a floor.
C) Buying a cap and selling a floor.
Q4. Suppose that a 1-year cap has a cap rate of 6 percent and a notional amount of $500 million. The frequency of settlement is quarterly, and the reference rate is 3-month LIBOR. The contract begins on January 1 and the settlements are on April 1, July 1, October 1, and the following January1. Given the indicated LIBOR rates on those dates in the table below, what is the maximum payoff and on what date did it occur on? (The days in each settlement period have been provided.)
|
Date |
|
Dt |
Payoff |
|
Jan. 1 |
6.15% |
|
- |
|
Apr. 1 |
6.15% |
90 |
? |
|
July 1 |
6.10% |
91 |
? |
|
Oct. 1 |
6.10% |
92 |
? |
|
Jan. 1 |
6.10% |
92 |
? |
A) $127,778 on Oct. 1.
B) $187,500 on April 1.
C) $189,583 on July 1. | 
发表于 2009-4-10 10:55
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