Suppose that the coupon reset formula for a floating-rate bond is 1-month LIBOR 1 220 basis...
Suppose that the coupon reset formula for a
floating-rate bond is
1-month LIBOR 1 220 basis points
a. What is the reference rate?
b. What is the quoted margin?
c. Suppose on a coupon reset date that 1-month
LIBOR is 2.8%.What will the coupon rate be for
the period?
Homework Answers
a: The reference rate is the LIBOR
b: The quoted margin is 220 basis points or 220*0.01% = 0.022%
c: At 2.8% LIBOR, the coupon rate will be 2.8%+ 0.022%
=2.822%
Add Answer to:
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