A firm has a $100,000 2-year variable interest loan with 180 day payment frequency. The firm decided to purchase a cap with X=6% and sells a floor with X=4%. The cap's price is $15,000 and the floor's price is $8000. Fill in the following table of interest payments based on the time t 180-day spot rates given (adding in the final loan repayment):

The net income at t=0 (NPV) of the loan with the collar consisting of the long cap and short floor is _____________. The annualized IRR of the loan with the collar is __________ . The annualize IRR of the loan without the collar would be ____________.

Transcribed Image Text:

t 3.50% 1804.50% 3605.50% 5406.50% Loan Interest Payment Call Payoff Put Payoff Net Payment t 3.50% 1804.50% 3605.50% 5406.50% Loan Interest Payment Call Payoff Put Payoff Net Payment

Answer rating: 100% (QA)

t interst rate LOAN INTEREST PAYMENT CALL PAYOFF PU... View the full answer