An institution buys an interest rate put option with 90, Ask an Expert

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An institution buys an interest rate put option with 90 days remaining until expiration on 270-day LIBOR with a notional principal of $5 million and a strike rate of 4.125%. At option expiration, 90-day LIBOR is 3.75% and 270-day LIBOR is at 4.75%.

The option payoff at expiration, to be paid later, is closest to:

A $0.

B $4,687.50.

C $23,437.50.

D $31,250.00.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92428213

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