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i read your notes on interest rate collar.What i still dont get is how do we got those strike price for call and put , where we got 4.25%? why call premium deducted ? since we are receiving the premium we should add right and since we pay premium on put option it should be subtract so we derive net receipts ? referring to b(i) calculation
in part b(ii) of calculation
we took 0.280 ,is it because in call option we exercise at lower interest than what to agreed (its given in q LIBOR 5 LESS 25 BASIS POINT ie; 4.75) equivalent option is the dec call option .I am bit confused here why we deduct .28 and add 0.085??
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