its a similar question in cheggs
raulgarcal7
Question
- Q (5 pts) A bank purchased $ 250 mln cap of 6% at a premium of 0.50% of face value. A $ 250 mln floor of 3% is also available at 0.40% of face value.
- If interest rates rise to 7% what is the amount received by the bank? What is the net saving after deduction of the premium?
- If the bank purchased also the floor what are the net savings if interest rates rise to 9%?
- What are the net savings if interest rates fall to 3%?
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