Q2: Interest Rate Cap Use binomial interest rate tree to find price of one-year European-style interest rate cap Interest rate cap has notional principal of $10 million and quarterly reset Four separate caplets: 90 days, 180 days, 270 days, and 360 days to expiration Exercise rate of 1% per quarter for all caplets . Notional Principal Exercise Rate $10,000,000 1.00% Day 0 90 180 270 360 2.00% 1.65% 1.50% 1.55% 1.25% 1.35% 1.00% 1.05% 1.25% 90-day Interest Rate 360-day Caplet 0.85% 0.90% 0.75% 0.80% 0.70% 0.60% 1.65% 1.50% 1.25% 1.35% 1.00% 1.05% 90-day Interest Rate 270-day Caplet 0.85% 0.90% 0.75% 0.70% 1.50% 1.25% 1.00% 1.05% 90-day Interest Rate 180-day Caplet 0.85% 0.75% 1.25% 1.00% 90-day Interest rate 90-day Caplet 0.85% Interest Rate Cap $0 Q2: Interest Rate Cap Use binomial interest rate tree to find price of one-year European-style interest rate cap Interest rate cap has notional principal of $10 million and quarterly reset Four separate caplets: 90 days, 180 days, 270 days, and 360 days to expiration Exercise rate of 1% per quarter for all caplets . Notional Principal Exercise Rate $10,000,000 1.00% Day 0 90 180 270 360 2.00% 1.65% 1.50% 1.55% 1.25% 1.35% 1.00% 1.05% 1.25% 90-day Interest Rate 360-day Caplet 0.85% 0.90% 0.75% 0.80% 0.70% 0.60% 1.65% 1.50% 1.25% 1.35% 1.00% 1.05% 90-day Interest Rate 270-day Caplet 0.85% 0.90% 0.75% 0.70% 1.50% 1.25% 1.00% 1.05% 90-day Interest Rate 180-day Caplet 0.85% 0.75% 1.25% 1.00% 90-day Interest rate 90-day Caplet 0.85% Interest Rate Cap $0