A floating rate bond and an inverse floating rate bond are backed by $100 million portfolio...
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A floating rate bond and an inverse floating rate bond are backed by $100 million portfolio of 10-year bonds. The coupon rate on the inverse floater equals: 12% - 2r. The market value of the portfolio of 10-year bonds rises to $105 million. Assume the credit quality of the portfolio does not change. At the reset date, the value of the inverse floating tranche will: O decrease by $10 million. increase by $10 million. O decrease by $5 million. O increase by $5 million. A floating rate bond and an inverse floating rate bond are backed by $100 million portfolio of 10-year bonds. The coupon rate on the inverse floater equals: 12% - 2r. The market value of the portfolio of 10-year bonds rises to $105 million. Assume the credit quality of the portfolio does not change. At the reset date, the value of the inverse floating tranche will: O decrease by $10 million. increase by $10 million. O decrease by $5 million. O increase by $5 million.
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