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A floater and an inverse floater are being created from a CMO tranche with a par value of $ 1 2 0 , 0 0

A floater and an inverse floater are being created from a CMO tranche with a par

value of $

120, 000

and a coupon rate of

7 % .

What is the coupon rate of the inverse floater if the coupon rate of the floater is LIBOR

+ 1 %

and the coupon leverage is

4 ?

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