This paper is a study on the estimation of the LIBOR market model, using government bond yields, instead of implied volatility data of interest rate caps in the Korean market.In order to calculate 3-month forward rates with government bond yields, linear interpolation and exponential interpolation are applied. This paper also contains four assumptions in volatility structures of forward rates. In closing, this paper compares the value of the caps using the LIBOR market model with the value of the caps using the Black model(1976) after sampling a period of high variability and a period of low variability.As a result, the LIBOR market model`s cap value is more undervalued than the Black`s cap value. And the gap between the value is significant. In terms of the interpolation method, there is no difference between linear interpolation and exponential interpolation when comparing each the LIBOR market model with the Black model. In terms of the assumptions in volatility structures, the best approximation of Black`s cap value is with the piecewise-constant volatility structure. The worst approximation of Black`s cap value was achieved with the constant volatility structure or the other piecewise-constant volatility structure. In terms of the volatility of the forward rate, the LIBOR market model`s cap value and the Black`s cap value are the more similar during a period of low volatility than during a period of high volatility. There is an especially large difference when using exponential interpolation and the constant volatility structure.