Your Firm Has Just Issued Five-Year Floating-Rate Notes Indexed to Six-Month

question 46

Multiple Choice

Your firm has just issued five-year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4 percent. What is the amount of the first coupon payment your firm will pay per U.S. $1,000 of face value, if six-month LIBOR is currently 7.2 percent?

• A)$36.00
• B)$37.25
• C)$74.50
• D)None of the above

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Definitions:

Depreciation

An accounting method to allocate the cost of a tangible asset over its useful life, reflecting wear and tear, decay, or obsolescence.

Gift Tax

A tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return.

Fair Market Value

The price at which an asset would trade in a competitive auction setting, reflecting the value of the asset in the marketplace.

Gain

The financial benefit obtained when the selling price of an asset exceeds its purchase price.