Interest payments are quarterly at libor plus

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Reference no: EM131301955

On April 15, KS Inc. Takes out a one year floating rate loan for $10 million. Interest payments are quarterly at LIBOR plus 200 basis points based on actual days in the period over 360. The payments are due July 15, January 15, and April 15. KS purchases a nine-month quarterly pay cap for $15,000 with a strike rate of 8.5%. The first caplet expires July 15. Assuming LIBOR rates on April 15,july 15,October 15,and January 15 are 8.0%,8.4%,8.65%,and 8.4% respectively, determine the four payoff dates on the loan, the loan interest paid, any option payment received, and the effective net interest paid. Day counts: April 15 to July 15: 91 days July 15 to October 15: 92 days October 15 to January 15:92 days January 15 to April 15: 90 days

Reference no: EM131301955

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