Reading 64: Interest Rate Derivative Instruments Los b~Q1 reference, created, periods, settled, amount

youzizhang

 

LOS b: Compute the payoff for a cap and a floor, and explain how a collar is created.

Q1. Assume that a three-year semi-annually settled cap with a strike rate of 8% and a notional amount of $100 million is being analyzed. The reference rate is six-month LIBOR. LIBOR for the next four semi-annual periods is as follows:

Period	LIBOR
1	7.5%
2	8.2%
3	8.1%
4	8.7%

What is the payoff for the cap for period 4?

A)   $700,000.

B)   $350,000.

C)   $0.

 

[此贴子已经被作者于2009-4-2 10:17:17编辑过]

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