A corporation rated A has issued a semiannual FRN in dollars. This is a perpetual bond, which will pay coupons indefinitely if the corporation does not default. The coupon is set at six-month LIBOR plus a spread of ¾%. The six-month dollar LIBOR is equal to 5%.
Six months later, the six-month dollar LIBOR has remained at 5%, but the market-required spread for A-rated corporations on long-term FRNs has moved to 1%. Give some estimation of the new value of the FRN on the reset date.

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The Answer of A corporation rated A has issued a semiannual FRN in dollars. This is a perpetual bond, which will pay coupons indefinitely if the corporation does not default. The coupon is set at six-month LIBOR plus a spread of ¾%. The six-month dollar LIBOR is equal to 5%.
Six months later, the six-month dollar LIBOR has remained at 5%, but the market-required spread for A-rated corporations on long-term FRNs has moved to 1%. Give some estimation of the new value of the FRN on the reset date.

A Corporation Rated a Has Issued a Semiannual FRN in Dollars