You Have Sold a $10,000 Notional Cap Consisting of a Single

question 2

Multiple Choice

You have sold a $10,000 notional cap consisting of a single caplet with a strike of 6% for a six-month underlying period. All interest rates are computed based on the 30/360 convention. At maturity of the cap period, the underlying interest rate is 7%. What is the net cash flow to you on maturity?

• A) \(- \$ 50.00\)
• B) \(+ \$ 48.31\)
• C) \(- \$ 48.31\)
• D) \(+ \$ 46.73\)

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Definitions:

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