can someone pls explain this to me?

CFA Level II
#21

C

#22

gz2nyc Wrote: ------------------------------------------------------- > I want to start thinking in this direction: > > If I *buy* LIBOR, I’m receiving LIBOR rates. > Since I’m paying float, I am effectively selling > LIBOR, thus the short the call on LIBOR. > > But what about long the put? I can’t seem to get > my arm around this one. IF LIBOR FALLS TO ZERO, you pay out nothing and receive 8% so big profit. i do find it confusing i will admit, especially without the costs. but the concept is somewhat intuitive.

#23

What got me is the first sentence saying exchange of six month libor for payment of fixed, I assumed that meant we were the payer of the fixed, making it D, completely missed the sentence following that.