PRMIA Exam 8006 Topic 8 Question 50 Discussion

Actual exam question for PRMIA's 8006 exam

Question #: 50
Topic #: 8

[All 8006 Questions]

The price of an interest rate cap is determined by:

1. The period to which the cap relates

II. Volatility of the underlying interest rate

III. The exercise or the strike rate

IV. The risk free rate

AI, II, III and IV

BI, II and III

CII, III and IV

DI, II and IV

Show Suggested Answer

Suggested Answer: B

The price of an interest rate cap is affected by all of the listed choices except the risk free rate. The risk free rate does not come into play in the pricing of caps, and therefore Choice 'b' is the correct answer.

by Venita at May 06, 2022, 04:36 AM

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