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A. Calculate the yield spread of the following floating rate bond: Annual coupon rate = reference rate + 200 basis points initial reference rate (annual)
A. Calculate the yield spread of the following floating rate bond:
- Annual coupon rate = reference rate + 200 basis points
- initial reference rate (annual) = 7%
- The bond has a 10-year term to maturity
- Assume the bond's par value = USD1000
- The price of the bond = USD1,022.48
B. Suppose the new reference rate is decreased to 3% two years after the bond is issued. What is the price of the bond then?
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Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
5th edition
1111527369, 978-1111527365
