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A firm purchases a collar with floor rate of 3% and a cap rate of 4.4%. The cap and floor have quarterly settlement and a notional principal of $10 million. The maximum outflow and inflow the buyer can expect on a given settlement is (assume equal settlement periods): A. $110,000 and maximum inflow = $140,000. B. $75,000 and maximum inflow = $140,000. C. $75,000 and maximum inflow = infinite. |