Problem B,

MaGAP Inc issued a Floating Rate Bond, paying semi-annual coupons at the rate of

(i_c/2) = [ref rate + 120 BPs]/2. The face value of the bond is $1000 and the current reference rate is 10.8%. The remaining time to maturity is 8 years (16 coupons) and the current market price of the bonds is P = $905.53.

Currently, each coupon is expected to pay ($)

a. 108

b. 120

c. 60

d. 54

The YTM (based on the current assumed cash flows) of the above floater is %

a. 12%

b. 13.%

c. 14%

d. 15%

The above floating rate bond is currently trading at the annual EffectiveMargin, (in BPs) of

a. 320

b. 22

c. 120

d. 196