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In this que, for calculating profit from exercising option why they have divided by 0.005?
And in c part for calculation of loss on call option why multiplied by 2× 100?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.
Please can you tell how they have selected the collar price, because in other questions we simply take the price which have minimum premium as out put option exercise price?
This is regarding c part for collarThe 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.
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