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| Bower would like to perform some sensitivity analysis on a one year collar to changes in LIBOR. Specifically, he wonders how the price of a collar (buying a cap and selling a floor) is affected by an increase in the LIBOR forward rate volatility. Using the information in Tables 1 and 2 which of the following is most accurate? The price of the collar will: A. decrease. B. increase. C. stay the same. |