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There is a question called Alecto Co in pilot 2012. It deals with a borrowing of 22,000,000 euro. I just wanted to try it the other way. If its a receipt of 60m , There is loss in both call and put for the increase by 0.5 % right. For the decrease i got a gain in the call option. Gain of .52%. is it right ? Should we find total gain.. ? And my Net receipt amounted to .384785 .Effective annual int rate : 1.15% . Is that right ..?
I am sorry, but I don’t know what you mean by a receipt of 60M.
Do you mean borrowing of 60M?? Interest rate options are used when we are either borrowing or depositing.
If you do mean borrowing of 60M then the workings would be the same as in the answer (except replacing 22M with 60M) and the effective annual interest rate would be exactly the same as in the answer.
Also I don’t know what you mean by trying it ‘the other way’. The options are options to sell futures at a fixed price.
Sorry for the unclear question John. I meant depositing of 60 million. Then for the decrease of 0.5% there will be a gain in call option i suppose.. ?
Should we find total gain.. ? And my Net receipt amounted to .384785 .Effective annual int rate : 1.15% . Is that right ..?
I hardly think so – it should be similar to the percentage in the answer to the original question.
I’m sorry but I cannot spend the time checking your workings for something that was not asked 🙁
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