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The coupon rate on a floater is: coupon rate=5-year Treasury yield - 100 basis points. The floater has a cap at 4%. Two statements about
The coupon rate on a floater is: coupon rate=5-year Treasury yield - 100 basis points. The floater has a cap at 4%. Two statements about the coupon structure were made: Statement 1: "When the 5-year Treasury yield is 4% on coupon reset date, the coupon rate will be 4%."
Statement 2: "The maximum coupon rate is 4% and that occurs when thr 5-year Treasury yield is at or above 5% on coupon reset date."
A Both statement are correct
B Exactly one statement is correct
C None of the statements is correct
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