Find payoff of interest rate call option on annual rate

Assignment Help Financial Management

Reference no: EM13880570

Find the payoff of an interest rate call option on the annual rate with an exercise rate of 10 percent if the one-period rate at expiration is 11 percent. (No days/360 adjustment is necessary and assume a $1 notional amount.)

1. 0.12

2. zero

3. 0.01

4. 0.0090

5. none of the above

Reference no: EM13880570

Questions Cloud

Borrowers in fixed mortgage rate and variable mortgage rate : What are the differences to the borrowers between Fixed Mortgage Rate and Variable Mortgage Rate? If the cost of capital is low and there is little demand for the product, would companies still expand their capital investment?

What is the length of the annuity time period : You are considering an annuity which costs $72,600 today. The annuity pays $5,100 a year. The rate of return is 4 percent. What is the length of the annuity time period?

Company have to wait before expanding operations : Winston enterprises would like to buy some additional land and build a new factory. The anticipated total cost is $158.82 million. The owner of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for..

What is the equipments after-tax salvage value : Kennedy Air Services is now in the final year of a project. The equipment originally cost $24 million, of which 75% has been depreciated. Kennedy can sell the used equipment today for $6 million, and its tax rate is 35%. What is the equipment's after..

Find payoff of interest rate call option on annual rate : Find the payoff of an interest rate call option on the annual rate with an exercise rate of 10 percent if the one-period rate at expiration is 11 percent.

Required to determine swaption payoff at expiration : Which of the following is not required to determine a swaption payoff at expiration?

Value of interest rate call option at maturity of loan : Determine the value of an interest rate call option at the maturity of a loan if the call has a strike of 12 percent, a face value of $50 million, the loan matures 90 days after the call is exercised, the call expires in 60 days, the call premium is ..

Find the net payment on an equity swap : Find the net payment on an equity swap in which party A pays the return on a stock index and party B pays a fixed rate of 6 percent. The notional amount is $10 million. The stock index starts off at 1,000 and is at 1,055.15 at the end of the period. ..

Confidence index increases or decrease : Suppose Baa-rated bonds currently yield 7.8%, while Aa-rated bonds yield 5.8%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.2%. What would happen to the confidence index? (Round your answe..

User Account

All Pages