Examples 124Some time ago, a German company issued a EUR 5m FRN (at the p.a. EUR LIBOR). Suppose the current conditions are as follows:The note matures in 2,5 years.
The EUR LIBOR rate, set 6 monthsago for the current period, is6% p.a.
The current six-month EUR LIBOR rate is 5% p.a.
What is the PV of the FRN?How would you price the FRN from above given that the coupon = EUR LIBOR + 10bp?
Multi-period deterministic cash fl
ows: FRNs - Perfectly indexed FRNs