Question: In a cap with quarterly reset dates, the cap rate is 3.5% per annum and the notional principal is $1 million. Suppose that the LIBOR

In a cap with quarterly reset dates, the cap rate is 3.5% per annum and the notional principal is $1 million. Suppose that the LIBOR rate is 4.0% per annum for a particular 3-month period. What is the approximate payoff at the end of the 3 months?

Group of answer choices

$10,000

$5,000

$2,500

$1,250

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