Suppose that a 1-year interest rate cap has a cap rate of 8% and a notional amount of $10 million. The frequency of settlement is quarterly and the reference rate is 3-month LIBOR. Assume that 3-month LIBOR for the next four quarters is as shown below. What is the total payoff of the interest rate cap (ignore time value of money)?
Quarter 3-Month LIBOR
1 8.7%
2 8.0%
3 7.8%
4 8.4%