Suppose that you buy an interest rate cap on three-month, Financial Management

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Suppose that you buy an interest rate cap on three-month

Suppose that you buy an interest rate cap on three-month LIBOR with a two-year maturity and somutaneously sell a floor on three-month LIBOR with a two-year maturity. Ignore the premiums. Draw a profit diagram that indicates when you will gain and lose on the combined positions. Compare this with different basic intrerest rate swap and futures positions.

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Financial Management: Suppose that you buy an interest rate cap on three-month

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