Table 11.26 Swap Rates and Cap Prices on November 3, 2008 3 Month LIBOR (%) 2.8588 Maturity Swap Rate (%) Cap Price (x100) 0.50 2.6486 0.0528 0.75 2.4929 0.1313 1.00 2.4320 0.2401 1.25 2.4491 0.3826 1.50 2.4938 0.5405 1.75 2.5561 0.7106 2.00 2.6260 0.8932 2.25 2.7252 1.1095 2.50 2.8630 1.3729 2.75 3.0108 1.6636 3.00 3.1400 1.9502 3.25 3.2471 2.2235 3.50 3.3474 2.4973 3.75 3.4408 2.7711 4.00 3.5270 3.0451 4.25 3.6076 3.3208 4.50 3.6835 3.5968 4.75 3.7531 3.87 5.00 3.8150 4.137 Original Data Source: Bloomberg. Reported Data are interpolated from quoted swap rates and flat volatilities, and then computed using Black's model. a. The zeros from the LIBOR curve are the following: t P(0,t) 0.25 99.2904 0.50 98.6053 t P(0,t) 2.75 92.0454 3.00 90.9898 t Pz (0, t) 5.25 81.4258 0.75 98.1544 1.00 97.6061 3.50 3.25 89.9522 88.8979 5.50 80.3754 5.75 79.3266 6.00 78.2843 1.25 96.9954 3.75 87.8326 6.25 77.2529 1.50 96.3399 4.00 86.7628 6.50 76.2365 1.75 95.6373 4.25 85.6875 6.75 75.2401 2.00 94.8950 4.50 84.6072 7.00 74.2689 2.25 94.0613 4.75 83.5326 7.25 73.3133 2.50 93.0947 5.00 82.4744 7.50 72.3608 b. The Ho-Lee model in the first 2 years (i = 8): i = 0 2.85% 0.25 0.50 0.75 1.00 1.25 1.50 2.82% 2.96% 3.42% 4.08% 4.67% 5.28% 2.04% 2.17% 2.63% 3.30% 3.89% 4.50% 1.39% 1.85% 2.51% 3.11% 3.72% 4.30% 1.07% 1.73% 2.33% 1.75 2.00 5.87% 6.67% 5.08% 5.89% 5.11% 2.93% 3.52% 4.32% 0.95% 1.54% 2.15% 2.73% 3.54% 0.76% 1.37% 1.95% 2.76% 0.59% 1.17% 1.98% 0.39% 1.19% 41%