21.14. Suppose that all risk-free (OIS) zero rates are 6.5% (continuously compounded). The price of a 5-year semiannual cap with a principal of $100 and a cap rate of 8% (semiannually compounded) is $3. Use DerivaGem to determine:

(a) The implied 5-year flat volatility for caps and floors

(b) The floor rate in a zero-cost 5-year collar when the cap rate is 8%.

Assume that all six-month LIBOR forward rates are 6.7% with semiannual compounding.