A 5-year floating-rate security was issued on Janu
A 5-year floating-rate security was issued on January 1, 2006. The coupon rate formula was 1-year LIBOR + 300 bps with a cap of 10% and a floor of 5% and annual reset. The 1-year LIBOR rate on January 1st of each year of the security’s life is provided in the following table:
During 2012, the payments owed by the issuer were based on a coupon rate
closest to:
A. 6.5%
B. 5.0%
C. 4.5%
参考解答
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2024-11-14 18:49:19
Ans:B;
B is correct because LIBOR + 300 bps at the reset date equals 1.5% + 3.00% = 4.5%, which is below the floor of 5.00% so the coupon rate will be equal to the floor.
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