Multiple Choice
Assume a binomial pricing model where there is an equal probability of interest rates increasing or decreasing 1 percent per year.
-What should be the price of a three-year 6 percent floor if the current (spot) rates are also 6 percent? The face value is $5,000,000, and time periods are zero, one, and two.
A) $44,060.
B) $66,030.
C) $22,462.
D) $21,598.
E) $25,000.
Correct Answer:
Verified
Correct Answer:
Verified
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