Question

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?

Answer 1

The first coupon payment is 37.25 dollars.

Step-by-step explanation:

This problem require us to calculate the first coupon payment that the firm will make. This can be easily calculated by multiplying the applicable interest rate with face value of notes issued.

The applicable interest rate is six month libor + 0.25% (1/4)

so

First coupon payment = (7.45%)'/2 * 1000 = 37.25 dollars

'7.25% + 0.25% = 7,45%