Suppose a corporation issues bonds of say $100 with a flaoting rate coupon payable anually like coupon rate = 5 year T note + 50 bps… Maturity 10 years… issued at say 1 Jan 2009 and will mature at 1 Jan 2019… 5 yr T note yield on 1 jan 2009 = 5% 5 yr T note yield on 1 july 2009 = 6% So on 1st july 2009 there is coupon payment… My question is whether the coupon payment will be $2.75 or $3.75.??..that is the coupon is set at the beginning of the settlement period or at the end… Thanks in advance!
Oh Yes…i meant semi anually… thanks ElanG
If it is set at the begining then why on July 1 it will be based on 6% rate it should be based on 5% rate right?why the ans is not 2.75%
I think the answer should be 2.75%. Use 5% and not 6% for T-Bill rate