Company A has issued $2 million (notional principal) in five-year bonds with a floating (variable) annual interest rate defined as the LIBOR plus 1.2% (Assume that LIBOR is at 2.3% in year 1 and increases by 0.55% per year thereafter). What is the total amount company A will pay in five years?
Company A has issued $2 million (notional principal) in five-year bonds with a floating (variable) annual interest rate defined as the LIBOR plus 1.2% (Assume that LIBOR is at 2.3% in year 1 and increases by 0.55% per year thereafter). What is the total amount company A will pay in five years?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Company A has issued $2 million (notional principal) in five-year bonds with a floating (variable) annual interest rate defined as
the LIBOR plus 1.2% (Assume that LIBOR is at 2.3% in year 1 and increases by 0.55% per year thereafter). What is the total
amount company A will pay in five years?
O a. $98,750
O b. 85,000
Oc. $128,750
O d. $115,000
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