There is an inverse floater with a current annual coupon of $40 and a face of $500. Its companion floater is selling at par, $500, and has a current annual coupon $10. Both of these instruments mature in 4 years. What is the current price of the bond that was used to generate these instruments and what is the price of the inverse floater? What is the effective coupon rate ceiling (the highest the coupon rate could be and still get P_floater = $500) on the floater?

Answer rating: 100% (QA)

What is the current price of the bond that was used to generate these instruments and what is the price of the inverse floater An inverse floater is a bond or other type of debt whose coupon rate has ... View the full answer