Question 2 (15 points)

A $5 million floater pays floating interest rate at 6month LIBOR + 50 basis points, reset semiannually. The sixmonth LIBOR was 4.00% at the last reset on January 15, 2007. Today is April 30, and the current 6month LIBOR is 3.50%. What is the market value of the floater today? This LIBOR is quoted as bond equivalent yield, i.e., APR with semiannual compounding. 1 percent is 100 basis points.