Fndc plc ( dec 06 adapted)

They have divided by 0.005 because the tick size is 0.005%. However, as I explain in my free lectures you do not have to use ticks (I never do) - it is up to you. Multiplying by 2 x 100 was done for the same reason. It is the same as dividing by 0.005.

The question says that they want to limit the maximum interest rate to 5.75%. Given that the company borrows at LIBOR plus 1.25% this means they want to limit LIBOR to 4.50% and the equivalent futures price (and therefore the exercise price for the options) is 95.50. Similarly they want to limit the minimum interest rate to 5.25% which means limiting LIBOR to 4.00% which is equivalent to a futures price of 96.00.