There's a $60m of a 7% coupon fixed rate (5year WAL, currentcoupon) PAC bond. The market specified margin on a LIBOR floater is 50bps and need to create $45m of a LIBOR floater. Using a Floater - Inverse Floater structure

1. How big is the inverse?

2. What would the leverage be for the Inverse coupon?

3. If a 25bp floor were chosen for the Inverse coupon, determine:

a. Coupon formula for the Floater

b. Cap/Floor for the Floater

c. Coupon formula for the Inverse Floater

d. Cap/Floor for the Inverse Floater