Question: 5. (4) Consider pricing a one-year maturity cap. Let the current par yield be 5% flat, the percentage volatility of the par yields be 20%,

5. (4) Consider pricing a one-year maturity cap. Let the current par yield be 5% flat, the percentage volatility of the par yields be 20%, and the strike rate be the one-year swap rate. 5.1. (4) Use the Black's model to price the cap. 5.2. (4) Describe the hedging strategy for the cap. 5. (4) Consider pricing a one-year maturity cap. Let the current par yield be 5% flat, the percentage volatility of the par yields be 20%, and the strike rate be the one-year swap rate. 5.1. (4) Use the Black's model to price the cap. 5.2. (4) Describe the hedging strategy for the cap

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