Exhibit 14-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 64

Multiple Choice

Exhibit 14-4
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
A company buys an interest rate cap that pays the difference between LIBOR and 8% if LIBOR exceeds 8%. Current LIBOR is 7%. The amount of the option is $2,500,000, and the settlement is every 6 months. Assume a 360 day year.
-Refer to Exhibit 14-4. Find the payoff if LIBOR closes at 7.8%.

• A) $0.00
• B) $25,000.00
• C) $50,000.00
• D) -$25,000.00
• E) -$50,000.00

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Definitions:

Trial Judge

A judge who presides over court trials, making decisions on matters of law and overseeing the proceedings.

Jury

A group of citizens selected to decide the outcome of a trial based on evidence presented to them in court.

Verdict

A formal decision made by a jury.

Judgment Notwithstanding

A legal decision where the court overturns the jury's verdict because the facts do not legally support the decision.