Why they have taken additional cost of borrowing of 136000 why not the increased cost of borrowing 867000.
Also while calculating premium cost why is 8.1 why not 22.3+30.4=52.7
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Daikon co
4y ago#1The third line of the question asks just about the extra cost of the borrowing.
When creating a collar, they pay a premium on the put options that they are buying, and the receive a premium from the person who is buying the call options from them. The whole point of creating a collar is to reduce the net premium payable - there is no other reason for creating it.
Have you watched my free lectures on collars?
Yes i have . Thank you
4y ago#3You are welcome. (Incidentally, I see that I had accidentally missed out the word 'other' in the last sentence of my explanation of the premium in my previous reply. I have now inserted the word!! Sorry :-( )
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