Value a five-year collar that guarantees that the maximum


Value a five-year collar that guarantees that the maximum and minimum interest rates on a LIBOR-based loan (with quarterly resets) are 5% and 7% respectively. The LIBOR zero curve (continuously compounded) is currently flat at 6%. Use a flat volatility of 25%. Assume that the principal is $100.

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Financial Management: Value a five-year collar that guarantees that the maximum
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