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(14) Assume that Turki Bank has contracted to buy a 5-year interest rate cap for a 2% fee based on a notional amount of KD
(14) Assume that Turki Bank has contracted to buy a 5-year interest rate cap for a 2% fee based on a notional amount of KD 50 million. Assume that the LIBOR rate (assuming still working) is the contracted rate and that the contracted ceiling (cap) of the interest rate is 5%. Based upon that, you need to find out the missing figures in the following table.
year 1 | year2 | year3 | year4 | year5 | |
LIBOR | 5.91% | 4.93% | 7.28% | 6.94% | 4.62% |
Interest rate floor | 5% | 5% | 5% | 5% | 5% |
Amount Received | A=? | B=? | C=? | D=? | E=? |
Amount Paid | F=? | ||||
Year 1 Year 2 Year 3 Year 4 Year 5 LIBOR 5.91% 4.93% 7.28% 6.94% 4.62% Interest rate Floor 5% 5% 5% 5% 5% Amount Received A= ? B= ? C= ? D= ? E= ? Amount Paid F = ?
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