BOA issues $100m in CMO. 30% of the issue is floater tranche with index = LIBOR (currently 2%) and margin = 1%. The remaining 70% is inverse floater tranche that is designed to keep the total cost of financing constant. The next year LIBOR goes up to 4%. What would be the interest paid to the floater tranche investors? Enter your answer in percent, but without percent sign. Hint: its a short question, not many calculations needed.

1%

2%

3%

4%

5%