[question removed by admin]
When the question says……. Equity return payer? who exactly do they mean? I understand that interest rates are below out later on so that makes sense. The index looks like it goes down from 881 - 850. Doesn’t this hurt the equity return payer?
The answer is below.
The equity-return payer will receive the floating rate from the end of the previous period, 3.2%, plus the negative return on the index over the second quarter.
[0.032 / 4 − (850 / 881 – 1)] × 1,000,000 = $43,187.29