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Of course, a little more than 100 basis points of this amount is the spread?

On page 322 Book 5 Example 12, does anyone know what the sentence means? “Of course, a little more than 100 basis points of this amount is the spread”

Solution 1:

=> Libor+ 100 Basis points = 9%+1% = 10%

=> Effective annual rate = 9.34%

So, 9.34%<10%

Solution 2:

=> Libor+ 100 Basis points = 5%+1% = 6%

=> Effective annual rate = 7.24%

So, 7.24%>6%

Therefore, why are the statements on both solutions  the same?

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The sentence applies to both situations. The first situation there was no payout out on the option while the second situation there was a payout.

Both situations have the same 100 bps over libor.

125mph wrote:

The sentence applies to both situations. The first situation there was no payout out on the option while the second situation there was a payout.

Both situations have the same 100 bps over libor.

smiley