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Hey there, I have the answers ready. but I need full explanation and showing the work on how the rates calculated. thanks. A floating-rate issue
Hey there, I have the answers ready. but I need full explanation and showing the work on how the rates calculated. thanks.
A floating-rate issue has the following coupon formula: 1-year Treasury rate + 30 basis points with a cap of 7% and a floor of 4.5% The coupon rate is reset every year. Suppose that at the reset date the 1-year Treasury rate is as shown below. Compute the coupon rate for the next year: 1-year T-bill First reset date 6.1% 6.4% second reset date 6.5% 6.8% Third reset date 6.9% 7% Fourth reset date 6.8% TA Fifith reset date 5.7% 82 Sisth reset date 5.0% 5.3% Severth reset date 4.1% 4.5% Eighth reset date 3.9% 4.5% Ninth reset date 3.2% 4.5% Tenth reset date 4.4% 4.7% Step by Step Solution
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