Assume the LIBOR rate is the same as the Treasury yield curve in Exhibit 1. What is the current price of the inverse floater in this case? (7.29% - LIBOR) Assume the bond that pays its coupon according to 6 month LIBOR rate, par value $100, and has two years to maturity. If there is not an exactly corresponding interest rate, you should use extrapolation method.

Exhibit 1 U.S. Treasury Yields for December 17, 2004 Maturity 1 month 3 month year 2 year 3 year 5 year 7 year 10 year 20 year Yield 1.98 2.21 2.66 3.00 3.18 3.54 3.85 4.16 4.80