Exhibit 23.8 Use the Information Below for the Following Problem(S)

question 67

Multiple Choice

Exhibit 23.8
Use the Information Below for the Following Problem(S)
An international investment firm buys an interest rate cap that pays the difference between LIBOR and 6% if LIBOR exceeds 6%. Current LIBOR is 5%. The amount of the option is $1,500,000, and the settlement is every 3 months. Assume a 360 day year.
-Refer to Exhibit 23.8.Find the payoff if LIBOR closes at 4.7%.

• A) -$45,000
• B) -$11,250
• C) $0
• D) $11,250
• E) $45,000

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Definitions:

Evolutionary Validity

The extent to which findings and theories in psychology are consistent with evolutionary principles and the history of human development.

Within-subjects Design

An experimental design in which the same subjects are exposed to all conditions or treatments, minimizing variability among participants.

Between-subjects

A research design where different subjects are assigned to each of the experimental conditions, ensuring individual variables do not influence the outcome.