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A bundle of floating rate bonds and inverse floating rate bonds are created with equal...

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Finance

A bundle of floating rate bonds and inverse floating rate bonds are created with equal weight from fixed-rate securities. The floaters coupon is 300 basis points above the LIBOR, while the inverse floaters rate is 16%, less the LIBOR. The coupons for each security reset every 6 months. What is the combined coupon rate for the floaters and inverse floaters?

Textbook page 29, which is the same example we did during class, may be helpful for this question. I am essentially asking you to calculate the maximum amount that you can pay out. This is very similar to the collaterals coupon rate in the example we did during class.

Also, note that 100 basis points = 1%

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