Hi, I have some trouble understanding this question
DMT Corp. issued a five-year floating-rate note (FRN) that pays a quarterly coupon of three-month Libor plus 125 bps. The FRN is priced at 96 per 100 of par value. Assuming a 30/360-day count convention, evenly spaced periods, and constant three-month Libor of 5%, the discount margin for the FRN is closest to:
- 180 bps.
- 400 bps.
- 221 bps.
I understand how to solve the question, but I don’t understand what it really means. I was under the impression that the rates in FRN under YTM were called the required rate ? It would be great if someone can shed some light on it