Sir, this is the answer for the above question. Please help with two things :
1. Why is PMT = 0.9 when the FRN is paying 6month libor + 80 bp. Shouldn’t PMT = 1.8
2. I/Y is calculated as 1.68% for 6 months, that is 3.36% for 1 year. We have 6m Libor = 1%. Thus, shouldn’t 12m Libor be 2%?
Therefore answer should be 3.36-2 = 1.36% right?
Hope this helps!