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

question 65

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 6.3%.

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

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Definitions:

Immune System

The body's defense mechanism against infectious organisms and other invaders, comprising various organs, cells, and proteins.

Psychological Factors

Emotional, cognitive, and behavioral characteristics that influence an individual's functioning.

Neurons

Specialized cells in the nervous system that transmit information to other nerve cells, muscle, or gland cells.

Hostility

A state of anger and aggression towards others, often resulting from perceived threats or frustration.