Flok

B for #3 seems incorrect...because the question refers to the value of the interest rate call at Expiration so there is no need for discounting for the value of the call...and you are correct that there is no discounting as opposed to FRA because the payoff is not immediate rather at the end of the interest rate period.

So I dont completely agree with the solution..



Edited 1 time(s). Last edit at Tuesday, June 2, 2009 at 01:04PM by sa.86.