Answer:
C. $2,500
Explanation:
As we got a floor, this protects from a decrease in rate. In this case, we have a floor of 5% and the variable rate drop to 4% which is below the floor so the floor triggers:
<u>We are asked for how much interest revenue were saved by the floor:</u>
<em>rate differences:</em> floor - actual = 0.05 - 0.04 = 0.01
<em>now we calcualte the interest as usual:</em>
principal x rate x time = payoff
1,000,000 x 0.01 x 3/12 = 2,500
Carpentry
Hope that helps! :)
The duration of Security P based on the info given will be 11 years.
<h3>How to calculate the time?</h3>
From the information given, Security P is a preferred stock and Security Z is a zero coupon bond that has 11 years remaining until maturity.
Therefore, the duration will be:
= (1 + y)/y
= (1 + 0.1)/0.1
= 1.1/0.1
= 11 years
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