Suppose that the time 0 simple forward rate i(0,2) is 0.045 per year, the notional principal LN is $40 million, the strike rate k is 0.04 per year, the time period for interest computation δ is 3 months, the caplet matures in T = 2 years, the average forward rate volatility is 0.15 per year, and a zero-coupon bond maturing after 2.25 years is worth B(0,T + δ) = $0.89 today.
What is the value of the caplet?