Assume Annual Compounding $\sigma = 0.30$ What Is the Price of a One-Year Maturity Cap on BDT

question 20

Multiple Choice

Assume annual compounding.The one-year and two-year zero-coupon rates in the BDT model are 6% and 7%.The volatility is given to be $\sigma = 0.30$ .What is the price of a one-year maturity cap on the one-year interest rate at a strike rate of 8% and a notional of $100?

• A)1.000
• B)1.025
• C)1.050
• D)1.075

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The violation of a law, duty, or other form of agreement.

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