Assume a binomial pricing model where there is an equal probability of interest rates increasing or decreasing 1 percent per year. What should be the price of a three-year 6 percent cap if the current (spot) rates are also 6 percent? The face value is $5,000,000, and time periods are zero, one, and two.
A)$25,000.
B)$20,409.
C)$22,041.
D)$42,450.
E)$66,030.

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The Answer of Assume a binomial pricing model where there is an equal probability of interest rates increasing or decreasing 1 percent per year. What should be the price of a three-year 6 percent cap if the current (spot) rates are also 6 percent? The face value is $5,000,000, and time periods are zero, one, and two.
A)$25,000.
B)$20,409.
C)$22,041.
D)$42,450.
E)$66,030.

Assume a Binomial Pricing Model Where There Is an Equal