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A floating rate issue has the following coupon formula: Three-month LIBOR + 40 basis points with a cap of 2.01% and a floor of
A floating rate issue has the following coupon formula: Three-month LIBOR + 40 basis points with a cap of 2.01% and a floor of 1.65% The coupon rate is reset every quarter. Suppose that at the reset date the three-month LIBOR is as shown below. Compute the coupon rate for the next quarter: Coupon rate + 1st reset date 2nd reset date 3rd reset date 4th reset date 5th reset date 1-year Treasury rate 1.65% 1.40% 1.25% 1.10% 1.35% [5 marks]
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To calculate the coupon rate for the next quarter we need to compare the current threemonth LIBOR ra...
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Bond Markets Analysis and Strategies
Authors: Frank J.Fabozzi
9th edition
133796779, 978-0133796773
