If the risk premium above LIBOR that the issuer must pay is 12.5 basis points, the next period's coupon payment on a £1,000 face value FRN will be
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A ten-year floating-rate note (FRN) has coupons referenced to 3-month pound LIBOR, and pays coupon interest quarterly. Assume that the current 3-month LIBOR is 4 percent. If the risk premium above LIBOR that the issuer must pay is 12.5 basis points, the next period's coupon payment on a £1,000 face value FRN will be
Group of answer choices
£31.25.
£82.50.
£165.00.
£10.31.
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- Suppose that the 9-month and 12-month LIBOR rates are 4% and 4.2%, respectively. What is the value of an FRA where 5% is received and LIBOR is paid on £1 million for the quarterly period? All rates are quarterly compounded and expressed as per annum. Assume that LIBOR is used as the risk-free discount rate. Select one: a. £478.115 b. £422.870 c. £479.062 d. £426.132Assume that you are preparing an amortization table for a three-year note with a stated and yield rate of 10% and 12%, respectively. Interest is payable every yearend. Which of the choices would be true? a. C4 - D4 = B4 b. E1 - D2 = E2 c. E3 + D3 = E4 d. B5 - D5 = C5A one-year Treasury bill currently offers a 5% rate of return. A two-year Treasury note offers a 5.5% rate of return. Under the expectations theory, what rate of return do investors expect a one-year Treasury bill to pay next year?
- A 3-year note has an annual coupon of 5% and par value of $100. If the 1-year spot rate is 1%; the 2-year spot rate is 4%; and the 3-year spot rate is 7%, what is the price of the note? Round your answer to two decimal places. No dollar sign.Consider a fixed-payment security that pays P100 at the end of every year for the three years. If the rate of discount is 10 percent, the present value of the bond is * P24.87 P248.69 P294.10 P1,000The coupon rate of a floating note that makes payments in June and December is expressed as six-month MMR + 50 bps. Assuming that the sixth-month MMR is 4% at the end of June 2021 and 3% at the end of December 2021, what is the interest rate that applies to the payment due in December 2021. Please input the answer as percentages (for example, if the answer is 14.56%, put in "14.56").
- A credit default swap requires a semi annual payment at the rate of 200 basis points per year. The principal is $1 billion and the credit default swap is settled in cash. A default occurs after four years and two months, and the calculation agent estimates that the price of the cheapest deliverable bond is 60% of its face value shortly after the default. List the cash flows and their timing for the seller of the credit default swap..Your bank is offering a term deposit that will earn investors an EAR of 10.70%. Your manager asks you to quote this as an APR with semi-annual compounding. What is the correct APR?Suppose in the question above, the tuition obligations have a Macaulay duration of 4.35 in years, and that you wish to immunize the tuition payments by buying a single issue of a zero coupon bond. What maturity zero coupon bond should you buy? Assume annual compounding. Round your answer to 2 decimal places.
- A $1000 par floating rate note pays a coupon rate of 180-day LIBOR plus a quoted margin of 1.5% semi-annually. Given that there is exactly 2 years to maturity, and the latest 180day LIBOR is 2.8%, and the discount margin is 1.0%, what is the value of the FRN at this point?Assume the Liquidity Premium Theory of the Term Structure of Interest Rates holds. The WSJ quotes 0.25% annual yield on a one-year T-note and 0.5% annual yield on a two-year T-note. Suppose the annual yield on a one-year T-note is expected to stay at 0.25% over the next 2 years. What must be the liquidity premium on a two-year T-note?2. Consider a 6% T-note with 1.5 years to maturity. Spot rates (expressed as semiannual yields to maturity) are: 6 months = 5%, 1 year = 6% and 1.5 years = 7%. If the note is selling for $992, compute the arbitrage profit and explain how a dealer would perform the arbitrage. Par value= 1,000