The fed will raise rates at the end

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Reference no: EM131176428

Assume your boss believes the cap is too expensive and is not convinced that the Fed will raise rates at the end of summer 2014.

1. What can you do to reduce the premium, given the availability of the floor as described above? What position have you created?

2. Graph the P&L and explain the upside and downside of this position as compared to the long position in an interest rate cap.

Reference no: EM131176428

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