Assume a Binomial Pricing Model Where There Is an Equal

question 103

Multiple Choice

Assume a binomial pricing model where there is an equal probability of interest rates increasing or decreasing 1 percent per year.
-What should be the price of a three-year 6 percent floor if the current (spot) rates are also 6 percent? The face value is $5,000,000, and time periods are zero, one, and two.

• A)$44,060.
• B)$66,030.
• C)$22,462.
• D)$21,598.
• E)$25,000.

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Definitions:

Radial Keratotomy

A surgical procedure to correct myopia (nearsightedness) by making radial incisions in the cornea to flatten it.

Photocoagulation

A medical procedure that uses light (usually a laser) to coagulate tissue, often used in treating various eye conditions, including retinal disorders.

Phacoemulsification

A modern cataract surgery technique that uses ultrasound waves to emulsify and remove the lens of the eye.

Tonography

A diagnostic test used in ophthalmology to measure the eye's outflow facility, helping in the diagnosis and management of glaucoma.