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does the answer for troder (sfm, 6/03, amended) in bpp rev kit based on the amended question.
the strike price and interest rate are so different.
clarify pleaseThe strike prices are equivalent to 4.75%, 5% and 5.25% so they are not so very different from the current LIBOR of 5%.
Also, of course, the whole purpose of using options is to be able to fix a limit on the effective interest that will be paid or (in this case) received.Have you watched my free lectures on options?
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