Interest rate cap has 4 caplets but only 3 payoffs?

CFA Level III
#1

CFAI V5, P448, example13.

Caplet Payoff in the table has three values only.

$16,146 0 7,813

It looks to me that interest rate cap does not cover all 4 the interest payment. Why?

#2

Cap pays when current int rate > strike rate

on 15th Jan - out of money

on 12th jan - in the money - ( 7.25 > 7) pay in arrrears & actual no of days - on 14th July

14th July - out of money

16th Oct - in the money…pay on 14th Jan 12

#3

Time delay:

at t+0 -> start of the loan

at t+1 -> we calculate the payoff for the 1st caplet

at t+2 -> the payment calculated at t+1 is actually settled…

…and so on

#4

Thanks, rahuls and LIII_cat.

I have checked all the examples and questions on the curriculum and Notes. The first caplet and the first floorlet are always out of the money. Notes calculates the payoff for the first caplet/floorlet(it’s all 0’s), while the curriculum leaves it blank.

So it’s safe to calculate it as usual in the exam.