Suppose You Have a Floating Rate Loan Tied to 90-Day

question 39

Multiple Choice

Suppose you have a floating rate loan tied to 90-day LIBOR and have hedged the interest rate risk with an interest rate cap.The effective annual rate actually paid on the loan with the cap is found using a methodology equivalent to

• A)computing the Black-Scholes-Merton option call price
• B)computing the net present value
• C)computing the internal rate of return
• D)computing the Black commodity option call price
• E)computing the WACC

---

Definitions:

Careless Writing

The production of text with errors or oversight due to a lack of attention, diligence, or concern for accuracy and quality.

Professional-Quality Message

Communication that is clear, concise, and well-organized, reflecting high standards of professionalism.

Extracellular Fluids

Fluids located outside the cells, providing a medium for nutrient and waste transport in the body.

Metabolic Function

Refers to the complex set of life-sustaining chemical transformations within the cells of organisms, including catabolism and anabolism.