1. Assume the initial rate on a 1/1 ARM is 2.50%. The loan has a margin of +225 basis points above Libor. In one year after the loan is originated, the Libor is 7.20%. What is the fully indexed rate on the loan in one year?
2. Staind, Inc., has 8 percent coupon bonds on the market that have 10 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 10 percent, what is the current bond price?