Business, 06.10.2019 07:01, afletcher2000

Assume that the formula for the coupon rates of a floater and an inverse floater are: floater coupon rate: reference rate + 1.25% inverse floater coupon rate: 10.50% - reference rate suppose the $400 million of the bond is used as collateral to create a floater with par value of $200 million and an inverse floater with a par value of $200 million, answer the following questions: (3 points) (1) what is the coupon rate of the fixed rate collateral for these two floating rate bonds? (2) suppose the floor for the inverse floater is 0.75%. what would be the cap of the floater? (2 points)

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Assume that the formula for the coupon rates of a floater and an inverse floater are: floater coupo...