Use the interest rate tree below.The first number at each node is the 0.5-year rate at that
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Use the interest rate tree below.The first number at each node is the 0.5-year rate at that node.The next number is the price of $1 par of a 0.5-year zero at that node.The next number, at the time 0 node, is the price of $1 par of a 1-year zero.
a) What is the value of a 5.25% interest rate cap on $100 notional amount of a 1-year semi-annual floating rate note?
b) What is the value of $100 par of a 1-year semi-annual floating rate note that is capped at 5.25%?
c) Consider a 1-year semi-annual interest rate collar with a 5.25% cap. What floor rate makes the collar worth zero?
Related Book For
Linear Algebra And Its Applications
ISBN: 9781292351216
6th Global Edition
Authors: David Lay, Steven Lay, Judi McDonald
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