Question
Consider a 20-year 5% annual coupon bond. Suppose $20M of the bond is used to create a floater and inverse floater each with $10M par
Consider a 20-year 5% annual coupon bond. Suppose $20M of the bond is used to create a floater and inverse floater each with $10M par value. Their coupon rates are: Floater coupon rate = (3-month T-bill rate) + 2% Inverse floater coupon rate = x (3-month T-bill rate) What must x be equal to?
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The Oxford Handbook Of Pricing Management
Authors: Ozalp Ozer, Robert Phillips
1st Edition
0199543178, 978-0199543175
