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Calculate the price of a 2-year floating rate bond (annual coupons) where the interest rate in any period is capped at 5.5%. What is the
Calculate the price of a 2-year floating rate bond (annual coupons) where the interest rate in any period is capped at 5.5%. What is the value of the rate cap feature? (Hint: recall that the coupon rate for a floating rate bond resets at the short rate at the beginning of the period, but is not paid until the end of the period.)
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