There is call option on an interest rate, in which the underlying is a 180-day interest rate at 4% at expiration, the notional principal is $10,000,000, and the exercise price is 5%. The call option is:
-In the money
-Out of the money
-At the money
-hard to tell
please find below the solution.... let me know if you need any clarification..
correct answer is option : -Out of the money
Since interest rate on expiry is lower than exercise rate therefore call is out of money.
There is call option on an interest rate, in which the underlying is a 180-day interest...
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