Question
1. (Valuing Caps.) Assume that the 6-month forward rate volatility is 18% and you see the following prices for 1-year and 18-month LIBOR-quality zero coupon
1. (Valuing Caps.) Assume that the 6-month forward rate volatility is 18% and you see the following prices for 1-year and 18-month LIBOR-quality zero coupon bonds: B0;1 D 95:784 B0;1:5 D 93:585:
(a) Use the Black 76 model to value a one-year caplet on the 6-month T-Bill rate, with a cap rate of 4.5%, written on a notional principle of $10,000
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Financial Management Theory And Practice
Authors: Eugene F. Brigham, Michael C. Ehrhardt
17th Edition
0357714482, 9780357714485
