In a Floor with Semiannual Reset Dates, the Floor Rate

question 6

Multiple Choice

In a floor with semiannual reset dates, the floor rate is 3.5% per annum and the notional principal is $1 million. Suppose that the LIBOR rate is 3% per annum for a particular 6-month period. What is the approximate payoff at the end of the 6 months?

• A) $10,000
• B) $5,000
• C) $2,500
• D) $1,250

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