Several months ago, Buddy Inc. issued a unique fixed income security. As of today, the security is maturing in 11 months.

The security pays semi-annual interest, which is equal to X% p.a minus the 6 month LIBOR, where X% is equal to the sum of 6% p.a. and the 3-month LIBOR rate. That is, in every six months, the interest is defined as:

(6%/2 +L3%/4) - L6%/2

where, L6 (quoted on an annual basis, in %) is the 6-month LIBOR and L3 (also quoted on an annual basis, in %) is the 3-month LIBOR. Assume that the 6-month LIBOR will never exceed 6% p.a. At maturity, the company will pay $100 as the face value of the security. Also, assume all other bonds and floating rate notes have a face value of $100, respectively.

Table 1 shows the 3-month and 6-month LIBOR rates observed in the previous months as follows:

Table 1

	2 months ago	1 month ago
3-month LIBOR	3.4% p.a.	3.1% p.a.
6-month LIBOR	3.7% p.a.	3.4% p.a.

For example, two months ago, the 3-month LIBOR rate was observed at 3.4% p.a.

Table 2 shows the predicted 3-month and 6-month LIBOR rates over the next few months:

Table 2

	5 months from today	11 months from today
3-month LIBOR	2.4% p.a.	2.6% p.a.
6-month LIBOR	2.5% p.a.	2.9% p.a.

For example, five months from today, the 3-month LIBOR rate is predicted equal to 2.4% p.a.

Table 3 shows the current LIBOR rates (assume continuous compounding) with different maturities over the next 12 months:

Table 3

Maturity	LIBOR	Maturity	LIBOR
1	2.7% p.a.	7	3.25% p.a.
2	2.8% p.a.	8	3.3% p.a.
3	2.9% p.a.	9	3.35% p.a.
4	3.0% p.a.	10	3.4% p.a.
5	3.1% p.a.	11	3.45% p.a.
6	3.2% p.a.	12	3.5% p.a.

For example, the current 3-month LIBOR rate is 2.9% p.a. compounded continuously.

Required:

Calculate the current price of the security. Show all working.