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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Definitions:

Self-perception Theory

The idea that individuals form their attitudes and opinions by observing their own behavior and concluding what attitudes must have caused it.

Behaviors

The actions or reactions of an individual or system in response to external or internal stimuli.

Attitudes

A psychological tendency expressed by evaluating a particular entity with some degree of favor or disfavor, often shaping behavior and perceptions.

Foot-in-the-door Technique

A persuasion strategy involving getting a person to agree to a small request to increase the chances of agreeing to a larger request later.