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An interest rate option (CAP) at a 6% with a premium of 0.3% is quoted in the market. You have borrowed money based on prime

An interest rate option (CAP) at a 6% with a premium of 0.3% is quoted in the market. You have borrowed money based on prime rate + 1% with a CAP of 6%. Calculate the maximum net interest cost you will pay and explain why.

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