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ANSWER GIVEN, PLEASE PROVIDE EXPLANATION STEP BY STEP ANSWER = Rate of the collateral: 6.75% & Cap=12.5% PLEASE SHOW WORKING OUT 3. Assume that the

ANSWER GIVEN, PLEASE PROVIDE EXPLANATION STEP BY STEP ANSWER = Rate of the collateral: 6.75% & Cap=12.5% PLEASE SHOW WORKING OUT

3. Assume that the formula for the coupon rates of a floater and an inverse floater are: Floater coupon rate: reference rate + 1.5% Inverse floater coupon rate: 12% - reference rate Answer the following questions: (A) What is the coupon rate of the fixed rate collateral for these two floating rate bonds? (B) Suppose the floor for the inverse floater is 1%. What would be the cap of the floater?

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