An Fl has purchased a $200 million cap of 9 percent at a premium of 0.65...

 

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An Fl has purchased a $200 million cap of 9 percent at a premium of 0.65 percent of face value. A $200 million floor of 4 percent is also available at a premium of 0.69 percent of face value. a. If interest rates rise to 10 percent, what is the amount received by the FI? What are the net savings after deducting the premium? b. If the Fl also purchases a floor, what are the net savings if interest rates rise to 11 percent? What are the net savings if interest rates fall to 3 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 11 percent? What if they fall to 3 percent? (Negative amounts should be indicated by a minus sign.) > Answer is complete but not entirely correct. a. Amount received Net savings $2,000,000 $ 700,000 b. Net savings if interest rates rise to 11 percent $ 1,320,000 $ (68,000) C. Net savings if interest rates fall to 3 percent Net savings if interest rates rise to 11 percent Net savings if they fall to 3 percent $ 4,080,000 ( $ 2,080,000 An Fl has purchased a $200 million cap of 9 percent at a premium of 0.65 percent of face value. A $200 million floor of 4 percent is also available at a premium of 0.69 percent of face value. a. If interest rates rise to 10 percent, what is the amount received by the FI? What are the net savings after deducting the premium? b. If the Fl also purchases a floor, what are the net savings if interest rates rise to 11 percent? What are the net savings if interest rates fall to 3 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 11 percent? What if they fall to 3 percent? (Negative amounts should be indicated by a minus sign.) > Answer is complete but not entirely correct. a. Amount received Net savings $2,000,000 $ 700,000 b. Net savings if interest rates rise to 11 percent $ 1,320,000 $ (68,000) C. Net savings if interest rates fall to 3 percent Net savings if interest rates rise to 11 percent Net savings if they fall to 3 percent $ 4,080,000 ( $ 2,080,000