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?

Question

Quizplus · Accepted Answer

First, we need to calculate the six-month LIBOR in decimal form by dividing it by 100:

7.2% / 100 = 0.072

Then, we add 0.25% to get the total floating rate:

0.072 + 0.0025 = 0.0745

Finally, we multiply the face value ($1,000) by the floating rate and divide by 2 (since it is a six-month rate):

($1,000 x 0.0745) / 2 = $37.25

Therefore, the first coupon payment per $1,000 of face value will be $37.25.

Your Firm Has Just Issued Five-Year Floating-Rate Notes Indexed to Six-Month