Kaplan materials in book 5, study session 15, page 75: How do they calculate the portfion of 2nd Capiet value that is 333,094? thanks
Sorry, study session 17.
I don’t have the books but one way to calculate the value of a cap is if you have options.
Remember, a cap is similar to a call options and a floor is is similar to a put option.
Two Year Call + One Year Call = Two Year Cap
A cap is a series of calls on interest rates.
Bump…
I’m wondering the same thing as the OP.
Step 2 it says add the two values together to get the value of the cap. The two calculated values are $233,513 and $113,356.
However the next line reads:
“Value of 2-year cap = $113,356 + $333,094 = $446,450”
Where did the “$333,094” come from?
p. 75 Book 5
Login to your schweser account and read the errata filed pertaining to this page. There’s a PDF file showing you the correct stuff…