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Michigan National Bank purchases a three-year interest rate cap for a fee of 2 percent of notional principal valued at $50 million, with an interest

Michigan National Bank purchases a three-year interest rate cap for a fee of 2 percent of notional principal valued at $50 million, with an interest rate ceiling of 11 percent and LIBOR as the index representing the market interest rate. Assume that LIBOR is expected to be 9 percent, 12 percent, and 13 percent at the end of each of the next three years, respectively. The net dollar amount received (or paid) by Michigan, including the initial fee, is $____.

A. +$500,000.

B. $500,000.

C. -$1,500,000.

D. +$1,500,000.

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