once effective interest rates are found out using various options .should we recommend an option that has highest effective interest rate if we are receiving money and if its borrowing low-interest rate?
Ask the Tutor ACCA AFM
interest rate futures
9y ago#1There is no 'best' option.
If you are borrowing money, then the lower you fix the cap the more the premium will be (and, of course, the premium will be effectively wasted if the option is not exercised).
All you can do in the exam is illustrate what will happen with each strike price, and make the point that I have made in my previous sentence.
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