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Calculate the yield spread of the floating rate bond

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Reference no: EM132652162

A. Calculate the yield spread of the following floating rate bond:

  • Annual coupon rate = reference rate + 200 basis points
  • initial reference rate (annual) = 7%
  • The bond has a 10-year term to maturity
  • Assume the bond's par value = USD1000
  • The price of the bond = USD1,022.48

B. Suppose the new reference rate is decreased to 3% two years after the bond is issued. What is the price of the bond then?

Reference no: EM132652162

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