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In 30 days, a firm wishes to borrow $15 million for 90 days. The borrowing rate is LIBOR plus 250 basis points. The current LIBOR is 3.8%. The firm buys an interest-rate call that matures in 30 days with a notional principal of $15 million, 90 days in underlying, and a strike rate of 4%. The call premium is $4,000. What is the maximum effective annual rate the firm can anticipate paying? A. 0.0671. B. 0.0687. C. 0.0603. |