An FI has purchased a $215 million cap of 8 percent at a premium of 0.80...

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An FI has purchased a $215 million cap of 8 percent at a premium of 0.80 percent of face value. A $215 million floor of 5.5 percent is also available at a premium of .85 percent of face value. a. If interest rates rise to 9 percent, what is the amount received by the FI? What are the net savings after deducting the premium? b. If the FI also purchases a floor, what are the net savings if interest rates rise to 10 percent? What are the net savings if interest rates fall to 4.5 percent? (Negative amounts should be indicated by a minus sign.) c. If, instead, the FI sells (writes) the floor, what are the net savings if interest rates rise to 10 percent? What if they fall to 4.5 percent? (Negative amounts should be indicated by a minus sign.) a. b. C. Amount received Net savings Net savings if interest rates rise to 10 percent Net savings if interest rates fall to 4.5 percent Net savings if interest rates rise to 10 percent Net savings if they fall to 4.5 percent $ $ $ $ $ $ 215 x 43 X 752,500 (1) (1,075) X (2) An FI has purchased a $215 million cap of 8 percent at a premium of 0.80 percent of face value. A $215 million floor of 5.5 percent is also available at a premium of .85 percent of face value. a. If interest rates rise to 9 percent, what is the amount received by the FI? What are the net savings after deducting the premium? b. If the FI also purchases a floor, what are the net savings if interest rates rise to 10 percent? What are the net savings if interest rates fall to 4.5 percent? (Negative amounts should be indicated by a minus sign.) c. If, instead, the FI sells (writes) the floor, what are the net savings if interest rates rise to 10 percent? What if they fall to 4.5 percent? (Negative amounts should be indicated by a minus sign.) a. b. C. Amount received Net savings Net savings if interest rates rise to 10 percent Net savings if interest rates fall to 4.5 percent Net savings if interest rates rise to 10 percent Net savings if they fall to 4.5 percent $ $ $ $ $ $ 215 x 43 X 752,500 (1) (1,075) X (2)

Answer rating: 100% (QA)

a Premium for purchasing the cap 215000000 080 Premium for purchasing the cap 1720000 If interes... View the full answer