Response to the following problem:
The Drifter Corporation has $100 million in floating-rate notes outstanding, with interest paid quarterly. The coupon reset formula is 3-month LIBOR plus 300 basis points. The coupon resets at the beginning of every quarter. There is a cap of 10% but no minimum coupon rate. Given the following rates for 3-month LIBOR, what is the coupon rate for the quarter:
(a) 3% (b) 4% (c) 7% (d) 9%?
PLEASE SHOW CALCULATIONS ON HOW YOU ARRIVED AT YOUR ANSWER.