Determine a fair price for an interest rate put

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Reference no: EM131325527

Use the Black model to determine a fair price for an interest rate put that expires in 74 days. The forward rate is 9.79 percent, and the exercise rate is 10 percent.

The appropriate risk-free rate is 8.38 percent. All rates are continuously compounded.

The volatility of forward rates is 14.65 percent. The put is based on $22 million notional principal and pays off based on 90-day LIBOR.

Reference no: EM131325527

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