Fixed Income Q12

0. Carla owns a floating rate note. Interest payments for the note are to be made on a semiannual basis with the second payment due in December 2013. The agreed upon coupon rate is six-month LIBOR + 30 bps. The table below shows the six-month LIBOR rates for the year 2013:

Date	Six-month LIBOR
January 1, 2013	5.0%
June 30, 2013	5.5%
December 31, 2013	6.0%

Which of the following is most likely to be the applicable interest rate for the
second payment?

Answer
Comment
Array

Option : B
Explanation : The applicable interest rate for the second payment due in December is the six month LIBOR at the end of June 2013 plus 30 bps. Therefore, 5.5% + 0.3% = 5.8%.

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