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Hi, I posted this question lately and the solver did not really show the steps clearly. I am just confused why the solver ignored and
Hi, I posted this question lately and the solver did not really show the steps clearly.
I am just confused why the solver ignored and did not include the cap premium of 3% and the floor premium of 1.5%. and even if the premiums were included, would they (each) be divided by 3 years or not?
Since the premiums were not included in the solution, the solution would be wrong.
Can you please tell me what the right answer is?
Please, answer the below question with showing the entire steps very clearly. Interest Rate Collar: A corporate treasurer is issuing a floating rate bond offering LIBOR+2.5% per year. The corporate treasurer buys a cap at 7% for 3 years with a premium of 3% and sells a floor 4% for 3 years at a premium of 1.5%. Complete the table below. LIBOR at year Year end Net payments by corporate treasurer end 4.5% 1 8% 2 3 1% Year Show the details of components of net payments by the Treasurer here end 1 2 3 Expert Answer Anonymous answered this Was this answer helpful? 1 19 answers Salution Floating nato 60nd Uban 2.S%. prp? BayCap . fa 3yn Promiom 3/ SalaD oan 41. i 3 -1S .S Nst Paymunt Lbanadnd y.S7 8 Yoasnd 2 3 Yoavand 1 Componont af ntpaymnt 8+2Slo S/Cab 7 3o 1. floan 4 +2.S 3 S. SoStep by Step Solution
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