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Sfm rtp que

Richa Patel (Article) (166 Points)

11 April 2014

The following que is given in sfm rtp which am not able 2 understand after lot of efforts. I dont understand what calculations are made to arrive at the ans. Kindly pls hlp me with the calculation of figures given in answer. Pls pls do rply if u knw...

QUE NO 4 INTEREST RATE COLLARS

The que can be found in the file attached together with answer.Pls just point out how figures are arrived in answer.

pls pls pls do rply

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3 Replies

nipun (student) (55 Points)
Replied 12 April 2014

It seems the reference point is wrongly taken in d solution... As per d question d reference fr d collar is 6 month libor so if d givn 6 monthly libor rates in d question breaches d cap or a floor only thn it is executed for eg on june 15 & dec 15, howver in d solution tey hve tken libor + 50 bps as d reference rate fr d collar nd accordingly calculatd d cap/floor amt which I think is incorrect.

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Richa Patel (Article) (166 Points)
Replied 13 April 2014

Originally posted by : nipun
	It seems the reference point is wrongly taken in d solution... As per d question d reference fr d collar is 6 month libor so if d givn 6 monthly libor rates in d question breaches d cap or a floor only thn it is executed for eg on june 15 & dec 15, howver in d solution tey hve tken libor + 50 bps as d reference rate fr d collar nd accordingly calculatd d cap/floor amt which I think is incorrect.