A Five-Year Cap Is Reset Annually Period

question 4

Multiple Choice

A five-year cap is reset annually period. The cap rate is 3% and the notional principal is $100 million. The 12-month LIBOR interest rate for the third year proves to be 5%. Which of the following is approximately true?

• A) The resulting payoff is $2 million at the beginning of the third year
• B) The resulting payoff is $2 million at the end of the fifth year
• C) The resulting payoff is $2 million at the end of the third year
• D) The resulting payoff is $2 million half way through the third year

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Definitions:

Tend And Befriend Syndrome

A response to stress that involves nurturing others and making friends.

Gender Differences

Variations in characteristics, behaviors, and roles typically associated with being male or female in a society.

Weapons Effect

The escalation of aggressive behavior simply due to the presence of a weapon.

Personalization Bias

The tendency to relate external events to oneself, even when there is no basis for making such a connection.