23-110 in Addition to Purchasing the Cap,if the Bank Also

question 21

Multiple Choice

23-110 In addition to purchasing the cap,if the bank also sells a 3-year 6 percent floor and interest rates are 5 percent and 7 percent in years 2 and 3,respectively,what are the payoffs to the bank? Specifically,the bank

• A)receive $50,000 at the end of year 2 and receive $50,000 at the end of year 3.
• B)pay $50,000 at the end of year 2 and receive $50,000 at the end of year 3.
• C)receive $0 at the end of year 2 and pay $50,000 at the end of year 3.
• D)receive $0 at the end of year 2 and $50,000 at the end of year 3.
• E)receive $50,000 at the end of year 2 and pay $0 at the end of year 3.

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