Use the Fact That the Pseudo-Probability of Default at Time

question 14

Multiple Choice

Use the fact that the pseudo-probability of default at time zero is (1/ 2) to answer the questions that follow.
-Consider a floorlet with maturity time 1 and strike price 0.035.What is the time 0 value of the floorlet?

• A) 0.0025
• B) 0.0000
• C) 0.0042
• D) 0.0050
• E) 0.0021

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