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A bank purchases a 3-year,6 percent $5 million cap ( call options on interest rate), where payments are paid or received at the end of
A bank purchases a 3-year,6 percent $5 million cap ( call options on interest rate), where payments are paid or received at the end of year 2 and 3 as shown below. assume interest rates are 5 percent in year 2 and 7 percent in year 3.
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