Exhibit 14-11 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 28

Multiple Choice

Exhibit 14-11
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
An international investment firm buys an interest rate cap that pays the difference between LIBOR and 6% if LIBOR exceeds 6%. Current LIBOR is 5%. The amount of the option is $1,500,000, and the settlement is every 3 months. Assume a 360 day year.
-Refer to Exhibit 14-11. Find the payoff if LIBOR closes at 4.7%.

• A) -$45,000
• B) -$11,250
• C) $0
• D) $11,250
• E) $45,000