A Regional Bank Negotiates the Purchase of a One-Year Interest

A regional bank negotiates the purchase of a one-year interest rate cap with a cap rate of 5.45% with a large bank. The option has a notional principle of $2 million and costs $3,400. In one year, interest rates are 6.33%. The regional bank's net profit, ignoring commissions and taxes, was

A) $105,600.
B) $18,400.
C) $17,600.
D) $14,200.
E) $11,500. Max [(Actual rate - Cap rate) x NP, 0] - 3,400 = ((6.33% - 5.45%) x 2M) - 3,400 = $14,200