Calculate the price of a cap on the 90 day libor rate

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Reference no: EM131241096

Calculate the price of a cap on the 90-day LIBOR rate in 9 months' time when the principal amount is $1,000. Use Black's model and the following information:

(a) The quoted 9-month Eurodollar futures price = 92. (Ignore differences between futures and forward rates.)

(b) The interest rate volatility implied by a 9-month Eurodollar option = 15% per annum.

(d) The cap rate = 8% per annum. (Assume an actual/360 day count.)

Reference no: EM131241096

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