Determine the Value of an Interest Rate Call Option at the Maturity

question 22

Multiple Choice

Determine the value of an interest rate call option at the maturity of a loan if the call has a strike of 12 percent,a face value of $50 million,the loan matures 90 days after the call is exercised,the call expires in 60 days,the call premium is $200,000,and LIBOR ends up at 13 percent.

• A)$125,000
• B)$83,333
• C)$208,000
• D)-$75,000
• E)none of the above

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Definitions:

Direct Materials

Raw materials that can be directly traced to the production of a specific product.