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

question 66

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 8.2%.

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

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Definitions:

Denature

The process by which a protein loses its three-dimensional structure due to external stress or compounds, affecting its functionality.

Enzyme

Biological molecules that significantly speed up the rate of virtually all of the chemical reactions that take place within cells.

Nonpolar Covalent Bond

A type of chemical bond where two atoms share a pair of electrons equally, usually between identical or similar atoms.

Monosaccharides

Simple sugars that serve as the building blocks for larger carbohydrates.