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Hello ! Help me with this question and please do provide explanation ABC Ltd. just issued 20,000 FRNs, (floating rate notes), each with the face
Hello ! Help me with this question and please do provide explanation
ABC Ltd. just issued 20,000 FRNs, (floating rate notes), each with the face value of US $50,000, maturity of 7 years, interest payment per annum and interest rate set as follows: i= Beginning of the period LIBOR + 1.0% Interest rate reset period is 3 months. LIBOR is 2% per annum today and it is expected to be 2.2%, 2.5% and 3.0% at the beginning of quarter 2, quarter 3 and quarter 4 respectively. 4 Find interest payment per FRN at the end of year. Suppose now that a mutual fund is interested to buy 1000 FRNs, each at the issue price of US $50,000. After one year, the price per FRN is expected to be US $50,800. Calculate: (i) The expected annual rate of return on investment of the mutual fund, (ii) The expected interest yield and the expected capital gains yield, and (iii)The expected total value of mutual fund's portfolio of 1,000 FRNs at the end of the year. ABC Ltd. just issued 20,000 FRNs, (floating rate notes), each with the face value of US $50,000, maturity of 7 years, interest payment per annum and interest rate set as follows: i= Beginning of the period LIBOR + 1.0% Interest rate reset period is 3 months. LIBOR is 2% per annum today and it is expected to be 2.2%, 2.5% and 3.0% at the beginning of quarter 2, quarter 3 and quarter 4 respectively. 4 Find interest payment per FRN at the end of year. Suppose now that a mutual fund is interested to buy 1000 FRNs, each at the issue price of US $50,000. After one year, the price per FRN is expected to be US $50,800. Calculate: (i) The expected annual rate of return on investment of the mutual fund, (ii) The expected interest yield and the expected capital gains yield, and (iii)The expected total value of mutual fund's portfolio of 1,000 FRNs at the end of the yearStep by Step Solution
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