A Five-Year Floating-Rate Note Has Coupons Referenced to Six-Month Dollar

question 46

Multiple Choice

A five-year floating-rate note has coupons referenced to six-month dollar LIBOR,and pays coupon interest semiannually.Assume that the current six-month LIBOR is 6 percent.If the risk premium above LIBOR that the issuer must pay is 1/8 percent,the next period's coupon rate on a $1,000 face value FRN will be

• A)$29.375
• B)$30,000
• C)$30.625
• D)$61.250

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