Find the Premium of a Correctly Priced Interest Rate Call

question 3

Multiple Choice

Find the premium of a correctly priced interest rate call on 30-day LIBOR if the current forward rate is 7 percent,the strike is 7 percent,the continuously compounded risk-free rate is 6.2 percent,the volatility is 12 percent and the option expires in one year.The notional amount is $30 million.

• A)$.0031
• B)$93,000
• C)$7,817
• D)$0.0012
• E)$36,000

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