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Question
Bonds maturing in 1, 2, and 3 years have prices of 0.9323, 0.8762, and 0.8002, respectively. A 0.8900 call on a 1-year bond matures in 1 year with σ = 0.25. What is the price of a 10.0% interest rate caplet that expires in 1 year?A) $0.50
B) $0.60
C) $0.70
D) $0.80
Answer
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Related questions
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