The LIBOR rate at selected dates are showed in Table 3. Please show your calculations. Discuss your result. Rates are continuously compounded- see attached image
The LIBOR rate at selected dates are showed in Table 3. Please show your calculations. Discuss your result. Rates are continuously compounded- see attached image
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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Question
Today is the 10th January 2023. You want to buy a Floating Rate Note (FRN) that matures on the 10th July 2027 and pays an annual coupon equal to LIBOR. Compute the fair price of the note. Use the data in Table 1. The LIBOR rate at selected dates are showed in Table 3. Please show your calculations. Discuss your result.
Rates are continuously compounded- see attached image
Transcribed Image Text:Maturity (years)
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Table 1
Date
10/01/22
10/07/22
10/12/22
10/01/23
Table 3
Zero rate
0.20%
1.40%
2.50%
3.50%
4.40%
5.20%
5.90%
6.50%
7.00%
7.40%
7.70%
7.90%
LIBOR
3.87%
3.49%
3.52%
3.56%
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