636 CHAPTER 16. INTERNATIONAL FIXED-INCOME MARKETS
- You bought an option that limits the interest rate on a future six-month loan
to, at most, 10 percentp.a.
(a) If, at the beginning of the six-month period, the interest rate is 11 percent,
what is the expiration value of this option?
(b) What is the option’s expiration value if the interest rate turns out to be
8 percent?- You bought an option that limits the interest rate on a future six-month
deposit to at least 10 percentp.a.
(a) If, at the beginning of the six-month period, the interest rate is 11 percent,
what is the market value of this option?
(b) What is the option’s value if the interest rate turns out to be 8 percent?