Question: 1. A firm issues a floater with 100 face value paying LIBOR on the first day of each calendar quarter. The floater will mature on

1. A firm issues a floater with 100 face value paying LIBOR on the first day of each calendar quarter. The floater will mature on Jan 1, 2040. Assume the yield curve is always flat. The floater was rated as AAA and has a similar credit quality as the LIBOR.

On April 1, 2019, the annual equivalent yield of LIBOR was 4%. The floater can be decomposed into a zero coupon bond and a floating rate annuity.

(A) Find the price of the floater. Explain how you get your answer.

(B) Find the price of the zero-coupon bond and the annuity.

(D) Find the duration and modified duration of the zero-coupon bond and the annuity.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

York Co. sells one product, which it purchases from various suppliers. York?s trial balance at December 31, 2021, included the following accounts: Sales (33,000 units @ $16)...

A firm issues a floater with 100 face value paying LIBOR on the first day of each calendar quarter. The floater will mature on Jan 1, 2040. Assume the yield curve is always flat. The floater was...

1.A firm issues a floater with 100 face value paying LIBOR on the first day of each calendar quarter. The floater will mature on Jan 1, 2040. Assume the yield curve is always flat. The floater was...

A firm issues a floater with 100 face value paying LIBOR every six months, two repricing and coupon payment dates are Jan 1 and July 1 each year. The floater will mature on Jan 1, 2044. Assume the...

Executive Memorandum (EM) Guidelines Prepare an executive summary of the papers that is only one page long.The assignment should be typed in Word, font size 11 double spaced, with minimum margins of...

Hi, I have a few questions to ask: 1.Consider the cash flow pattern of the CDS in Exhibit 2. One way to think about a credit default swap is that its cash flows can be replicated with long and short...

I've attached the question as a word file, thanks! JWCL165_c10_444-505.qxd 8/12/09 7:24 AM Page 444 10 Liabilities Chapter STUDY OBJECTIVES After studying this chapter, you should be able to: 1...

Evaluate the potential gains and losses for forwards,future,call options,put options and swaps. Outline and describe the different risks that each type of derivative contract faces. Describe...

e. Consider the 8.125% notes due 2010. Assume that Rite Aid issued these notes on May 1, 2003 and that the company pays interest on the last day of April each year. i. According to a press release...

At September 30, 2016, the accounts of Park Terrace Medical Center (PTMC) include the following: Accounts Receivable...............$ 143,000 Allowance for Bad Debts (credit balance)...... 3,300...

m n/5, when m = 16 and n =

a) Explain what is meant by the Fetch-Decode-Execute cycle. b) Describe three actions that take place during the Fetch- Decode-Execute cycle.

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...