You own a $117,100 par, floating-rate bond indexed to 3M Libor. If 3ML is 3.4%...

You own a $117,100 par, floating-rate bond indexed to 3M Libor. If 3ML is 3.4% and the coupon spread (QM) is 1.6% then what is the first period's coupon payment if the bond pays its coupon 4 times per year?

Expert Solution

Coupon per quarter = (Coupon rate / No of coupon payments per year) * Par value

Coupon per quarter = ((3 month LIBOR + Coupon spread) / 4) * Par value

Coupon per quarter = ((3.4% + 1.6%) / 4) * $117,100

Coupon per quarter = $1463.75

First period's coupon payment = $1463.75

jeff jeffy answered 2 years ago

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