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

question 33

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 6.3%.

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

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Definitions:

Degrees of Freedom

The number of values in the final calculation of a statistic that are free to vary, often associated with the sample size.

Two-way ANOVA

A statistical test used to determine the effect of two independent variables on a dependent variable.

Factor A

A specific variable or element considered in an experimental design or analysis, often denoted as a primary independent variable.

Interaction

In statistics and research, the phenomenon where the effect of one variable on an outcome is modified by the level or presence of another variable.