A brokerage firm purchases a 1000 face value coupon bond paying 6% per year on a semi-annual frequency. From that bond, the firm creates two bonds: A floater and an inverse floater. The face value of the floater is 700 and it pays LIBOR. What is the annual coupon rate of the inverse floater?

Answer rating: 100% (QA)

Coupon rate of the floater L the LIBOR rate Fraction of the bond that is the flo... View the full answer