Interest Rate Collar

1. The interest is calculated as 6/12 of the annual interest. The premium and the gain or loss on the futures is multiplied by 6/3 because the deposit is for 6 months and they are 3 month futures. I don't know if you have watched all the lectures on interest rate risk, because I do go through this in the lectures. 2. In Massie they are depositing money and therefore for the collar they will buy a call option so as to limit the minimum interest rate and sell a put option which limits the maximum interest rate. Given that the are only the two exercise prices available, the collar can only be buying a call option at 97.00 which limits the minimum interest rate to 3% and selling a put option at 96.50 which limits the maximum interest rate to 3.5%. Doing anything else would not make any sense.